[TheForge] Ghost Steel

[Rob Fertner]

This article about phony inventories of steel in China is going to shake up
the industry and the World economy.
Here's an excerpt:

"China's demand has faltered with the slowing economy, pushing steel prices
to a three-year low and making it tough for mills and traders to keep up
with payments on the $400 billion of debt they racked up during years of
double-digit growth.
As defaults have risen in the world's largest steel consumer, lenders have
found that warehouse receipts for metal pledged as collateral do not always
lead them to stacks of stored metal. Chinese authorities are investigating a
number of cases in which steel documented in receipts was either not there,
belonged to another company or had been pledged as collateral to multiple
lenders, industry sources said.
Ghost inventories are exacerbating the wider ailments of the sector in
China, which produces around 45 percent of the world's steel and has over
200 million metric tons (220.5 million tons) of excess production capacity.
Steel is another drag on a financial system struggling with bad loans from
the property sector and local governments.
"What we have seen so far is just the tip of the iceberg," said a trader
from a steel firm in Shanghai who declined to be identified as he was not
authorized to speak to the media. "The situation will get worse as poor
demand, slumping prices and tight credit from banks create a domino effect
on the industry." 

Go to:
http://www.zerohedge.com/news/how-chinas-rehypothecated-ghost-steel-just-vap
orized-and-what-means-world-economy