Steel traders look to the Internet

BEIJING - China's largest steel trader, China Minmetals Corp (CMC), on Tuesday opened its e-commerce platform to other dealers to help the sector handle overcapacity and a credit crunch.

The platform, www.xinyilian.com, will link commodity buyers with sellers and gradually become an online steel supermarket, said Yu Engang, deputy general manager of Minmetals Development Co Ltd, a subsidiary of the CMC group.

The platform also provides online financing for steel dealers.

"During hard times, the steel sector must build an open and standard e-commerce platform," Yu said.

China's steel industry is struggling through the mire of overcapacity and losses amid the economic slowdown. Steel companies posted combined losses of 2.33 billion yuan ($380 million) in the first quarter, compared with profits of 8 billion yuan a year ago, according to data by the China Iron and Steel Association (CISA). Crude steel output continued to expand in the first quarter by 2.4 percent to 203 million tons.

The steel industry, which relies heavily on bank loans for financing, was among the hardest hit by the credit crunch. The average debt-to-asset ratio for the steel industry now stands at 70 percent, according to the China Chamber of Commerce for Metallurgical Enterprises (CCCME).

Steel companies or dealers have to endure a 10 percent reduction in credit and higher interest rates, said Zhao Xizi, honorary president of CCCME. The whole steel industry will have to hold on for another three years before going through the "winter" period, Zhao said.

Since 2012, a growing number of commodity transactions have been executed through e-commerce in China, where more than 100 third-party platforms are focused on the steel industry.

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