Zibo Hongda Mining Co (宏達礦業公司), which is based in Shandong Province, said it did not raise enough funds to make its full debt payment due on Tuesday, according to a statement posted to the Shanghai Clearing House Web site.
The iron ore miner issued 400 million yuan (US$61 million) of notes last year with a coupon rate of 8 percent and had to repay 431.91 million yuan in principal and interest on Tuesday.
Chinese mining companies are struggling as Chinese President Xi Jinping (習近平) pushes to reduce pollution and cut industrial overcapacity amid the worst economic slowdown in a quarter century.
MOVE BY BANKS
Some banks have withdrawn loans to Zibo Hongda, increasing the company’s liquidity shortage, according to a statement from Dagong Global Credit Rating Co on Tuesday last week posted on the Chinamoney Web site.
“Demand from the company’s customers, mainly steel firms, has been falling as they struggle due to overcapacity,” said Ji Weijie (季偉傑), a bond analyst at China Securities Co (中信建設證券) in Beijing.
“Industries with overcapacity problems have very high credit risks, especially those companies not backed by the government,” Ji said.
CUTTING CAPACITY
China will close between 100 million and 150 million tonnes of annual crude steel capacity by 2020, according to an outline published on the Web site of the State Council on Feb. 4.
That is as much as 13 percent of existing capacity estimated by the China Iron & Steel Association in January at 1.2 billion tonnes.
At least 10 companies have reneged on bond obligations in the past two years even as the government loosened monetary policy and allowed more companies to sell notes in the onshore market.
Zibo Hongda said it would try to raise money through multiple channels to repay the debt, according to its statement.
Two telephone calls to the firm’s main number went unanswered yesterday.
