The issue of financing challenges in steel logistics has become increasingly severe, acting as a major bottleneck for the survival and growth of steel trading companies. Navigating this crisis and finding a way out has become a critical concern for the steel logistics industry, drawing significant attention from all stakeholders involved in the steel supply chain.
Banks have traditionally focused on credit assessments, but the situation continues to deteriorate. A general manager from a Shanghai-based steel trading company remarked, “Financing problems for steel trade companies have worsened significantly lately. Banks not only impose strict controls on steel traders, but also frequently initiate lawsuits against them, making it even harder for traders to secure financing.â€
It has been reported that since the start of this year, ten major listed banks, including ICBC, CCB, Minsheng Bank, Everbright Bank, Industrial Bank, Ping An Bank, CITIC Bank, and China Hua Xia Bank, have launched financial loan disputes against steel traders. In 2013, the Pudong New District Court in Shanghai handled 2,500 steel trade-related cases, with 1,051 cases filed in the first quarter of this year. The total amount involved in these cases reached 19 billion yuan in 2013 and 11.4 billion yuan in the first quarter of this year, indicating that the scale of such disputes remains large and is expected to persist until next year.
The credit crisis in Shanghai’s steel trade is now spreading to traders and steel mills in South China. Companies in Lecong are facing similar financing difficulties. Banks are pulling back, leading to liquidity shortages. Over 1,300 member companies of the Lecong Steel Association have either high interest rates or are overdue on payments, with over 80% of users involved in non-performing loans. It is anticipated that concentrated litigation will occur between May and June. In the past one or two years, the tight funding and credit collapse are unlikely to improve significantly.
Industry insiders suggest that current financial and commercial disputes have entered a peak period. Today, it is extremely difficult for steel traders to obtain loans from banks. Some businesses turn to alternative financing channels, such as trusts or underground banks, which come with higher costs and greater risks. Therefore, addressing the financing challenges in the steel trade sector is urgently needed.
E-commerce innovation is opening up new pathways for the industry. In recent years, iron and steel e-commerce has grown rapidly, offering financial services to steel trading companies and emerging as a "blue ocean" for suppliers and electricity providers. As e-commerce technology penetrates the financial sector, the integration of e-commerce platforms with the financial industry and changes in traditional steel trade models have become an inevitable trend.
The iron and steel e-commerce model offers multiple approaches, one of which involves strengthening platform development. This includes establishing and managing financing relationships between steel mills, traders, and banks, as well as setting up third-party financing arrangements between traders, construction material companies, and banks. These innovations ensure adequate funding for steel exchanges, increase warehouse logistics, and generate income through capital operations.
Huai Minerals has pioneered the "platform + base" e-commerce model, achieving seamless integration of business flow, logistics, capital flow, and information flow. By moving away from the traditional "warehouse receipt pledge" model, it now implements a "dynamic goods value" system. With new financial services, under controlled cargo rights and closed payment systems, real-time balance of bank loans is ensured, guaranteeing safe and efficient fund operations while maintaining stable bank earnings. Currently, Ping An Bank, Hua Xia Bank, and Industrial Bank have signed credit agreements totaling 70 billion yuan with Huai Minerals. Through the Steel Online platform, steel mills and their customers can access low-interest-rate, high-pledge-rate financing options, including daily interest rate calculations based on the dynamic value of goods.
Industry experts believe that effective e-commerce financial services can boost customer engagement, ease financing difficulties, and inject vitality into the steel group. Many online customers are now expressing financial demands, which is a positive sign for the development of the "platform + base" model. As long as the model strictly follows full-process management and tightly controls both capital and goods, it can ensure safety and provide better service for steel companies.
Indeed, the "platform + base" model has built a bridge of trust, easing the pressure on inventory funds caused by direct sales from production plants. It extends upward to raw materials, reducing the pressure on raw material purchases, and expands both ends of the industrial chain to address multi-link credit issues.
For banks, the main concern is the security of assets and the prevention of bad debts. E-commerce model innovations allow banks to see the actual transaction prices on the platform, helping them accurately assess the value of goods. Additionally, customer credit records on the platform assist banks in identifying safer projects, creating a barrier for financial security under the e-commerce model.
The industry believes that the current steel e-commerce is still in its early stages, with models undergoing continuous exploration and practice. Further improvement, soundness, and innovation are essential for its development. One notable innovation is the full-process online supply chain finance model, characterized by low risk, low cost, high traffic, and high yield.
This model introduces a "dynamic value" approach, replacing the traditional static "warehouse receipt pledge" method. It enables real-time dynamic balance of the bank's loan amounts, ensuring safe and controllable funds. Two key financial products are currently being integrated: the manufacturer's dynamic inventory and downstream customer orders.
Another innovation is "one-to-one" financial services, where a single bank connects to multiple specialized venues. This requires upstream producers to conduct all transactions online and include all products in a comprehensive control system. Specialized trading customers settle through the same bank, enabling closed operations and fund supervision.
Real-time financial risk coverage is another feature. Upstream players must open two accounts at the main bank: a supervision margin account and a settlement account. The balance in the supervision margin account plus the controlled dynamic inventory value must be equal to or exceed the bank's loan amount, with any excess transferred to the settlement account for real-time risk management.
Additionally, the model supports downstream customer credit-based payment functions. By using the e-commerce platform, banks can monitor the entire process, solving issues related to uncontrolled credit conditions.
Finally, the model achieves a large-scale effect through closed fund operations. Each node of the goods is processed through one bank, allowing for targeted payments and closed operations. For example, with a quota of 1.5 to 2 billion yuan, a flow of 20 billion yuan can be generated.
Through the "four-in-one" approach—transparent business flow, clear information flow, safe capital flow, and full-process logistics management—the model truly realizes the "four flows." This is the essence of the "platform + base" e-commerce model and represents a significant innovation.
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