The issue of financing difficulties and high costs in the steel logistics sector has become increasingly severe, acting as a major bottleneck for the survival and growth of steel trading companies. Navigating this crisis and breaking free from the current challenges is a critical concern for the 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 worsen. A general manager from a Shanghai-based steel trading company stated, "Financing problems for steel trade companies have become more serious recently. Banks are not only tightening their control over steel trading enterprises, but they are also pursuing legal actions against them, making it even harder for traders to secure funding."
It has been reported that since the beginning of this year, ten listed banks, including ICBC, China Bank, Minsheng Bank, Everbright Bank, Industrial Bank, Ping An Bank, CITIC Bank, and Huaxia Bank, have initiated financial loan disputes against steel traders. In 2013, the Shanghai Pudong New District Court handled 2,500 steel trade-related disputes, 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. These cases remain widespread, and the trend is expected to continue into 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 challenges, with banks withdrawing funds and traders struggling with liquidity. Over 1,300 member companies of the Lecong Steel Association have either high interest rates or overdue payments, with 80% of users involved in non-performing loans. It is anticipated that concentrated litigation will occur between May and June, and the tight funding and credit issues are unlikely to improve significantly in the next one or two years.
Industry insiders note that the current wave of financial and commercial disputes has reached its peak. It is now extremely difficult for steel traders to obtain bank financing. Some turn to alternative, non-bank institutions such as trusts or underground lenders, which come with higher costs and greater risks. As a result, there is an urgent need to address the financing challenges faced by the steel trade industry.
E-commerce models are emerging as a promising solution, opening up new pathways for the sector. In recent years, iron and steel e-commerce has experienced rapid growth, offering financial services to steel trading companies and becoming a “blue ocean†for suppliers and electricity providers. With the integration of e-commerce technology into the financial sector, the transformation of traditional steel trade models and the development of new business models have become inevitable trends.
The iron and steel e-commerce model includes various approaches, such as strengthening platform development. These platforms facilitate financing relationships between steel mills, traders, and banks, as well as the management of inventory pledges and guarantees. The establishment of a three-party financing model involving traders, construction material companies, and banks ensures that steel exchanges are well-funded, increases warehouse logistics flow, and generates income through capital operations.
Huai Minerals has pioneered the “platform + base†e-commerce model, achieving seamless integration of business, logistics, capital, and information flows. This model replaces the traditional “warehouse receipt pledge†with a “dynamic goods value†approach. Through innovative financial services, it ensures real-time balance of bank loans under controlled cargo rights and closed payments, ensuring 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 RMB with Huai Minerals and other steel companies.
Industry experts believe that effective e-commerce financial services can boost customer engagement, ease financing difficulties, and inject vitality into the steel industry. Many online customers are now expressing financial needs, which is a positive sign for the development of the “platform + base†model. As long as strict full-process management is followed and both capital and goods are closely monitored, the safety of the entire model can be ensured, providing better services for steel companies.
Indeed, the “platform + base†model has created a bridge of trust and credit, 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 extends the two ends of the industry chain to solve multi-link credit issues.
For banks, the primary concern is the security of assets and the prevention of bad debts. E-commerce innovation allows 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 help banks identify safer investment opportunities, creating a barrier for financial security under the e-commerce model.
The industry believes that current steel e-commerce is still in its early stages, with models undergoing exploration and practice. Continuous improvement, soundness, and innovation are necessary, making this the inevitable trend of development in the steel e-commerce sector.
Under the “platform + base†model, a full-process online supply chain finance model is being implemented, characterized by low risk, low cost, high traffic, and high returns. Its innovation lies in:
1. A dynamic value-based online supply chain finance model that replaces the traditional static supervision of warehouse receipts with a real-time dynamic balance system.
2. “One-to-one†financial services where a single bank connects to multiple specialized venues, ensuring closed operations and fund monitoring.
3. Real-time financial risk coverage, requiring upstream players to open two accounts at the main bank for supervision and settlement.
4. Credit-based payment functions for downstream customers, enabling better control through the e-commerce platform.
5. Achieving scale effects through large-volume transactions, allowing banks to gain significant traffic with minimal capital.
6. Post-loan management through real-time monitoring of logistics and capital flows, enhancing efficiency, safety, and economic benefits.
By integrating transparent business flow, clear information flow, secure capital flow, and full-process logistics management, the “platform + base†model truly realizes the “four flows.†This is the essence of the model and represents a significant innovation in the steel industry.
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