Balli Steel Warns Limited Credit Insurance Continues To Hamper
on: October 14, 2009, 7:54 am
Author: Balli Steel
Steel has warned that the limited availability of credit insurance
is continuing to have a serious impact on the global steel market.
The current lack of credit insurance means that whilst the demand
for steel has increased over the past quarter trading volumes
have remained static.
insurance is a critical element in the supply chain as it provides
suppliers of raw materials with guarantees that outstanding balances
will be paid in the event of a steel manufacturer failing. In
turn, credit insurance also protects steel producers themselves
in the event of manufacturers defaulting on contracts. Steel traders
and distributors are also heavily reliant on this insurance to
be able to buy and sell on the commodities market.
Alaghband, Director of Balli Steel commented: "The trade
finance sector of the steel industry is heavily reliant on bank
finance and credit insurance. In the past three months bank finance
has returned to normal trading, however, insurers remain unwilling
to provide business credit insurance. This bottleneck is crippling
companies' abilities to trade with each other and could have far
reaching consequences across the European economy just as the
first signs of economic recovery are presenting themselves."
Steel highlights that this is an industry wide issue affecting
even the largest organisations. For example in February 2009,
Euler Hermes reduced the amount of cover it was willing to supply
to Corus, the UK's largest steel manufacturer, due to weakening
global demand for steel.
Steel highlights that as the banking crisis unfolded during 2007
and 2008, central banks stepped in to provide liquidity in the
markets and eventually brought stability to the system. However,
with the exception of AIG in the United States, insurers have
not received the same level of assistance from Government and
this is having a considerable impact on the sector.
Steel believes that governments and central banks should assist
in providing guarantees in the re-insurance market to provide
the confidence to enable insurers to provide the necessary cover.
If necessary, governments should be willing to become shareholders
in institutions which require financial assistance.
Alaghband, continued: "The restoration of free flowing credit
insurance market is essential for normal trading in steel to be
resumed. We have first hand experience of European steel distributors
being unable to complete deals worth several hundred thousand
pounds due to a lack of available insurance. This is brining paralysis
to certain sections of the steel market and is hampering economic
recovery. We therefore believe where necessary governments and
central banks should be willing to underwrite insurers to ensure
business can resume."
Notes for Editors
Balli Holdings is a large private, multi-national corporation,
headquartered in London, with offices in Dubai and other key business
hubs around the world.
Balli Group was established in 1982 and operates a number
of affiliated companies specialising in commodity trading, industrial,
real estate and private equity with operations in over 20 countries.
Together with its affiliated companies, Balli employs over 2,000
Steel is the company's principal operating subsidiary, and is
one of the largest independent traders of steel in the world.
Balli Steel provides raw materials and steel to a number of market
segments including steel mills, steel service centres, pipe and
tube makers, the oil and gas industry and other designated end-user
segments such as the packaging products industry.
company's real estate operations currently have are invested in
a significant property portfolio comprised of over 900,000 sq
ft of property under development with a Gross Development Value
of some $800 million, and an additional 2 million sq ft and a
GDV of almost $2.5 billion in the pipeline.
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