The coking industry in Shanxi is facing a severe debt crisis, with arrears spreading across the entire supply chain. Downstream users are struggling to pay coking enterprises, which in turn are unable to repay their debts to banks. At the same time, coking companies and coal mines are also locked in mutual unpaid obligations. As the coke market continues to weaken, these financial issues have become increasingly serious. According to data from a mid-sized coking company in Jinzhong City, the total amount of outstanding debts between coal mines, end-users, and banks has surpassed 80 million yuan. Industry insiders estimate that the so-called "four-corner debt" in the province's coking sector has already reached over 10 billion yuan.
Since the start of this year, the weakening coke market has intensified the problem of delayed payments. Some downstream users have even resorted to malicious defaults. In June, shortly after the Shanxi Coke Association proposed production cuts and price stabilization measures, steel companies from other provinces invited Shanxi Coking Co., Ltd. to submit bids with strict payment conditions. A survey of several large coking firms in Linyi City found that most companies owe more than 40 million yuan, with some reaching as high as 70 million. A report released by the Shanxi Provincial Economic Committee in mid-September highlighted that the coking industry is experiencing high levels of accounts receivable and inventory financing, leading to increased credit sales and inflated book profits. However, cash flow and operational efficiency have significantly declined.
Most coking projects depend heavily on bank loans, with monthly interest payments typically ranging from two to three million yuan. The lack of liquidity has caused many coking companies to fall behind on their loan repayments. According to an investigation by the Linyi City Credit Union, it is extremely difficult for local coking enterprises to meet their repayment obligations. To cover interest costs, some companies have turned to refinancing, but financial institutions are wary of the risks and hesitant to lend, further deepening the crisis. According to internal sources, the Shanxi Provincial Credit Union provided over 20 billion yuan in loans to the coking industry between 2003 and 2004. With the looming loan repayment deadline in 2006, the debt crisis is expected to fully unfold.
The arrears between coking companies and coal mines began last year, when coal prices continued to rise. Main coking coal became scarce and almost unattainable at times. In January 2005, the Shanxi coking industry was forced to limit production due to a so-called "coal shortage." To secure supplies, coking companies often paid in advance to coal mines, with prepayments ranging from several million to tens of millions of yuan. However, following repeated mining accidents in Shanxi, many coal mines were forced to halt operations for safety inspections. Some of them were permanently shut down during the process. As a result, many coking companies lost their prepayments. One company in Jinzhong paid 10 million yuan in advance for a coal mine in Liulin, only to find out later that the mine had closed, leaving the remaining funds unrecoverable. Additionally, some coal products, such as high-sulfur coal, faced weak demand, causing coking companies to accumulate significant debts to coal mines—up to 15 million yuan in one case.
Industry insiders warn that the "four-corner debt" not only burdens the coking sector but also poses major financial risks. The core issue lies in the declining coke market and rising losses within the industry. Given the current situation, it is unlikely that this problem will be resolved quickly. Relevant authorities must remain vigilant, take proactive measures, and develop strategies to mitigate potential risks before they escalate.
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