Chinese steel giant closes down, top commodity trader dragged down.

On Monday, July 29, “Xiangyu Co., Ltd.”, one of China’s largest commodity traders, announced that its state-owned parent company, “Xiamen Xiangyu Group,” will bear any claims against Jiangsu Delong Nickel Industry. Delong Nickel Industry, a stainless steel producer, has been struggling with debt issues that have impacted the global commodities industry.

According to Bloomberg, Xiangyu Co., Ltd. had revenue exceeding $60 billion last year and is a publicly listed trader on the Shanghai Stock Exchange. Delong Nickel Industry is one of its major trading customers. Due to Delong Nickel Industry facing bankruptcy, Xiangyu’s stock price fell by 10% last Friday and continued to drop by 4.6% on Monday, hitting the lowest closing price since 2020.

Xiangyu Co., Ltd. stated that its parent company will handle the risk exposures related to Delong Nickel Industry, including prepayments and accounts receivable. They believe that transferring financial risks to the parent company will “protect the interests of the listed company and its investors.”

Chinese Steel News reported that on July 24, the People’s Court of Xiangshui County in Jiangsu Province announced that it had filed for bankruptcy reorganization for four companies, including Delong Nickel Industry.

Public records show that Delong Nickel Industry was founded by the “Steel King” Dai Guofang and is a privately owned enterprise specializing in nickel alloy smelting, mainly engaged in nickel alloy production and sales. The other three mentioned companies are also controlled and owned by Dai Guofang’s family members and relatives.

The court announcement mentioned that due to the large number of creditors involved and the complex legal relationships with significant regional implications, a social intermediary institution will be selected through competitive means to act as the bankruptcy administrator for these four companies.

Delong Nickel Industry’s factories in China and Indonesia produce over 10 million tons of stainless steel and other alloy products annually, with many of its businesses now facing the impact of falling nickel prices.

According to their official website, the company has over 8,800 employees in China and more than 10,000 employees in Indonesia, forming a complete industrial chain production layout including iron smelting, steelmaking, steel rolling, pickling, and cold rolling.

In the 2023 Top 500 Private Enterprises in China released by the China Enterprise Confederation on September 12 last year, Delong Nickel Industry ranked 47th with a revenue of 169.5 billion yuan.

In the 2024 New Fortune 500 Wealth Creation List, the Dai family of Delong Nickel Industry ranks 113th with a wealth of 25.5 billion yuan.

The collapse of Delong Nickel Industry has shocked the Chinese metal industry and serves as a recent example of the debt crisis sweeping through China. Given Dai Guofang’s extensive business network, hundreds of banks, wholesalers, equipment suppliers, and commodity traders in China and abroad are closely monitoring this case.

In their statement on Monday, Xiangyu Co., Ltd. did not provide detailed information on the scale of transferring debt rights to their parent company, but public records indicate that Delong Nickel Industry is a major trading customer of Xiangyu Co., Ltd.

Earlier this month, in a stock exchange announcement, Xiangyu Co., Ltd. listed Delong Nickel Industry as its largest metal customer in 2023, with a trading value of 7.1 billion yuan (980 million dollars) for nickel-iron and chrome-iron products.

In a Credit Rating Report Limited report in June, it was mentioned that Xiangyu Co., Ltd. had increased its prepayment scale since 2023 to “stabilize upstream resources.” As of the end of March this year, the company’s debt had increased to 64.6 billion yuan, resulting in a relatively heavy debt burden.

Xiangyu Co., Ltd. stated in their announcement that the Delong Nickel Industry factory mentioned in the court documents is operating normally under government supervision.