Why Chinese stainless steel giant Jiangsu Delong faces bankruptcy reorganisation
BEIJING, July 31 (Reuters) -A Chinese court is considering whether to proceed with bankruptcy reorganisation for Jiangsu Delong Nickel Industry, the country's third-largest stainless steel producer.
Following are details about the company and its difficulties.
WHAT IS JIANGSU DELONG?
Founded in 2010 by Dai Guofang, Delong was a comeback for Dai, who nearly two decades ago spent five years in detention, accused of tax evasion after expanding capacity at his Jiangsu Tieben Steel without obtaining needed approvals, media reports at the time said.
Delong is based in Xiangshui county in Jiangsu province, where it operates three smelting plants. It has stainless steel capacity of 5 million metric tons in China and another 2.5 million in Indonesia, according to an analyst estimate.
Its 2022 revenue was 169.5 billion yuan ($23.4 billion), according to business information provider Qichacha.
WHAT IS LIKELY TO HAPPEN?
Several industry insiders said they expect Jiangsu Delong's Chinese operations ultimately to be absorbed at least partially by state-owned enterprises. China prizes stability and seeks to avoid messy corporate failures with ripple effects.
The four Delong-related firms facing reorganisation are now under government supervision and operating normally, according to a filing this week by Xiamen Xiangyu, a large commodities firm controlled by the government of the coastal city of Xiamen, which has had extensive dealings with Delong.
Two Delong suppliers also told Reuters that they were now dealing directly with government entities.
Delong could not be reached for comment.
WHAT IS THE WIDER IMPACT?
Little, thus far, industry watchers said, partly because Delong's difficulties had been known, and because of expectations for a government solution.
"For companies like Jiangsu Delong, it's too big to fail. Also, bankruptcy reorganisation is not something new in China ... there were some similar cases in the past that showed minimal impact on the production side," said Kevin Bai, a Beijing-based analyst at consultancy CRU Group.
Indeed, Jiangsu Delong was itself the saviour of another company in bankruptcy proceedings when it took over Jiangsu Shengte Steel Co in 2020.
"We have not seen much volatile movement in prices of stainless steel these days, showing that the market is relatively calm in the face of this issue," Bai said.
A worker at Gunbuster Nickel Industry, a Delong operation in Indonesia that was the site of a deadly clash last year, said it was operating normally.
Agus Tjahajana Wirakusumah, a special staff at Indonesia's energy and mineral resources ministry, said the government is monitoring the proceedings.
HOW DID DELONG GET TO THIS POINT?
Jiangsu Delong grew quickly and like several Chinese companies invested heavily in Indonesia as the Southeast Asian country's metals and mining sector mushroomed.
Falling ferro-nickel prices and rising material costs late last year at a 48%-owned Indonesia joint venture contributed to an annual net loss there estimated at 1.8-2.2 billion yuan, according to a filing by a unit of China First Heavy Industries Co Ltd, a shareholder in the operation.
Since early this month, Jiangsu Delong stakes in subsidiaries worth more than 4 billion yuan have been frozen by Chinese courts, according to company information provider Qichacha.
WHERE DO PROCEEDINGS STAND?
Four firms controlled by Xiangshui county, where Delong is based, have asked a court there to approve bankruptcy reorganisation for Delong and three related firms.
The court will appoint an administrator to draft a reorganisation plan, in the event that it approves the proceedings. It set a July 29 deadline for would-be administrators to apply for the role.
($1 = 7.2515 Chinese yuan)
Reporting by Amy Lv, Siyi Liu, and Fransiska Nangoy; Writing by Tony Munroe; Editing by Jacqueline Wong
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
