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China coal and steel reforms squeeze debt-The 19th China(Guangzhou)Int’l Metal &Metallurgy Exhibition
8/3/2017 steel expo-metal &metallurgy expo |
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China Daily reported that radical reform of the coal and steel industries has cut overcapacity and reduced debt levels among State owned enterprises. A research report from GF Securities Co Ltd showed that repacking debt into equity and promoting policies to revamp the supply chain are helping to transform the sectors. The report stated that "The deals will not only reduce their leverage ratio and financial pressure, but also facilitate their industrial transformation and upgrading.”
The GF Securities report stated that "As cyclical industries, high debt ratios bring huge pressure to enterprises. So, it is urgent for them to reduce the asset-liability ratio."
The reforms in the coal and steel sectors will also make these SOEs leaner and more able to adapt to a high-tech world. This in turn will cut oversupply and stabilize prices within the industries, and make these sprawling companies more competitive.
Mr Yao Yang an analyst at Shenwan Hongyuan Securities said that "Output reduction will lead to a rise in prices and company profits. This will lay a solid foundation for the implementation of the debt-to-equity swap deals."
Overcapacity in the coal and steel industries has been drastically reduced in the first part of this year. Statistics from the National Development and Reform Commission showed that in the first five months of 2017, 42.39 million tonnes of steel capacity had been cut, reaching 84.8% of the annual target reduction. Figures also revealed that 111 million tonnes of coal was left in the ground during the first six months. This was 74% of the annual target reduction for the fossil fuel in China.
-The
19th China(Guangzhou)Int’l Metal &Metallurgy Exhibition
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