Maanshan Sues Suppliers for Alleged $127 Million Defaults
A unit of Maanshan Iron & Steel (323) Co., the second-biggest Hong Kong-traded steelmaker, filed lawsuits against suppliers alleging they defaulted on contracts worth 803.6 million yuan ($127 million).
The logistics unit of the steelmaker, based in the Anhui province of China, sued nine companies including Shanghai Beiyue Investment Co. and an individual for failure to deliver goods and refund payments, Maanshan said in an exchange filing yesterday. The suppliers are based in Shanghai and the eastern port city of Zhangjiagang.
Executives at Shanghai Beiyue, Shanghai Dandong Iron & Steel Co. and Shanghai Huacheng Materials Co. weren’t available for comment. Calls to the other six companies, including Zhangjiagang Free Trade Zone Haozhou Logistics Co., weren’t answered. You Shuchun, the individual named in Maanshan’s statement, couldn’t be traced in a search by Bloomberg News.
The troubles at Maanshan’s suppliers are a consequence of a sputtering Chinese economy, which grew at the slowest pace since 2009 in the second quarter. Steel prices tumbled to the lowest since the 2008 global financial crisis crisis early this month on sluggish demand from builders and automakers.
“Steelmakers have difficulties in collecting money or goods as capital conditions are tight through the industry chain,” said Sarah Wang, a Shanghai-based analyst with Masterlink Securities Corp. (2856) in Shanghai. “But this is the first time we’ve heard about a steelmaker suing its suppliers.”
Chinese prices of hot-rolled coil, an industry benchmark, have gained 10 percent after the nation approved spending on subways, railways, roads and ports on Sept. 6. Steel prices climbed 0.2 percent today to 3,599 yuan a metric ton, according to the researcher Beijing Antaike Information Development Co.
“Finance conditions will be improving at the steel industry” if the rebound in prices continues, reducing chances for contract defaults, Wang said.
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