China Billionaire’s Falling Steel Bond Highlights Industry Smog Stress

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All eyes on Nanjing Iron & Steel…and smog. “Bonds of Nanjing Iron & Steel Co., partly owned by Chinese billionaire Guo Guangchang, are set for their worst month on record as concern mounts the government’s campaign to reduce smog and overcapacity may exacerbate losses,” reports Bloomberg Businessweek.

“Nanjing Steel, which lost 561.3 million yuan ($92.7 million) in 2012, faces possible delisting of its 2018 bonds should it post a second straight loss for last year, according to Shanghai stock exchange rules. Notes by other makers of the metal including Anyang Iron & Steel Inc. and Xinyu Iron & Steel Co. have also tumbled as authorities this month told provinces and municipalities to cut air pollutants by as much as 25 percent.”

“’Investors are worried the steel industry may underperform because of the fight against air pollution and the curb on overcapacity,’ said Chen Ying, a bond analyst at Sealand Securities Co. in Shenzhen. ‘They’re also concerned Nanjing Steel may report a second year of losses for 2013.’”

In metal price news for steel…
Chinese steel closed mixed last Friday. The price of iron ore 58% fines from India were range bound. The price of Chinese slab fell 0.3 percent. The price of Chinese HRC held steady.

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Also on the LME, the cash price of steel billet saw little movement last Friday at $350.00 per metric ton. The steel billet 3-month price held steady last Friday on the LME, remaining around $355.00 per metric ton.

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The 3-month price of the US HRC futures contract fell 0.2 percent to $629.00 per short ton. The spot price of the US HRC futures contract held steady at $675.00 per short ton.