—— E-commerce Financing Innovation Perspective

Currently, the problems of difficult and costly financing in the steel logistics sector are becoming increasingly severe, having become a major "bottleneck" for the survival and development of steel trading enterprises. How to respond to the crisis and overcome the difficulties is a major issue facing the steel logistics industry, and has also aroused widespread concern and attention from all parties in the steel industry chain.

Banks Concentrate on "Loan Recovery", Financing Problems Continue to Ferment

A general manager of a steel trading company in Shanghai said in an interview with a reporter from China Metallurgical News: "Recently, the financing problems of steel trading enterprises have become increasingly serious. Banks are not only strictly controlling loans to steel trading enterprises, but are also concentrating on lawsuits against steel trading enterprises to 'recover loans', which makes the financing difficulties for traders even worse."

It is understood that since the beginning of this year, 10 listed banks, including ICBC, Bank of China, Minsheng Bank, Everbright Bank, Industrial Bank, Ping An Bank, CITIC Bank, and Huaxia Bank, have initiated financial loan dispute lawsuits against steel traders. The Shanghai Pudong New Area Court accepted 2,500 steel trade loan dispute cases in 2013, and in the first quarter of this year alone, the number reached 1,051. In 2013, the amount involved in steel trade cases in Pudong banks was 19 billion yuan, while in the first quarter of this year, the amount involved in steel trade cases reached 11.4 billion yuan. Steel trade loan cases are still erupting on a large scale, and this situation is expected to continue until next year.

The credit crisis in Shanghai's steel trade is gradually spreading to traders in South China and steel mills. Steel trading enterprises in the Lecong area are facing the same difficulties as Shanghai steel traders: banks are massively withdrawing loans, and traders' capital chains are breaking. Of the more than 1,300 member units under the Lecong Steel Association, about 400 can no longer pay interest, about 700 are overdue, and about 80% of users are affected by joint guarantees. A concentrated wave of litigation is expected in May-June. In the next year or two, the industry's tight funds and collapsed credit situation will not be significantly reversed.

Industry insiders suggest that steel trade financial commercial dispute cases are currently at a peak. Nowadays, steel traders find it very difficult to obtain loans from banks, and some merchants turn to non-bank financing institutions with higher financing costs, such as trusts and underground banks. This not only increases the financing costs of steel traders but also brings huge risks. Therefore, solving the financing difficulties of the steel trade industry is urgent.

E-commerce Financing Model Innovation Opens New Financing Paths

In recent years, steel e-commerce has been rising rapidly, and providing financial services to steel trading enterprises is the "blue ocean" of steel e-commerce. With the rapid penetration of steel e-commerce technology into the financial sector, integrating with the financial industry through e-commerce platforms and changing traditional steel trading methods and financing models has become an inevitable development trend.

There are various financing models for steel e-commerce, one of which is strengthening the construction of financing platforms. Such e-commerce financing platforms include the upstream supply chain of the steel circulation industry, i.e., the establishment and operation of financing relationships among steel mills, traders, and banks; the establishment of steel spot pledge by traders and financing guarantee and management relationships among upstream and downstream traders; the management of tripartite financing business among traders, construction material users, and banks, ensuring sufficient funds for steel circulation, increasing warehouse logistics flow, and gaining operating service income from capital operations, etc.

Huaikuang Logistics was the first in the country to propose the "platform + base" e-commerce model, achieving seamless integration of business flow, logistics, capital flow, and information flow. It abandons "warehouse receipt pledge" and promotes new supporting financial services such as "dynamic cargo value financing". Under the premise of controllable cargo rights and closed payment collection, it ensures real-time dynamic balance of bank financing amounts, ensuring safe and efficient capital operation and sustained stable bank returns. Currently, Ping An Bank, Huaxia Bank, and Industrial Bank have signed credit agreements totaling 70 billion yuan with Huaikuang Logistics and Steel. Steel mills and their customers can apply for online dynamic cargo value financing with "low interest rates, high pledge rates, and planned daily interest calculation" through the Steel online financing platform.

Industry insiders believe that providing good financial services on e-commerce platforms can not only increase the enthusiasm of online customers to participate and alleviate financing difficulties, but also inject impetus and vitality into the "blood" circulation of the steel circulation industry. Now, many online customers have raised financial needs, which is a good thing for the development of the "platform + base" e-commerce model. As long as operations are strictly carried out in accordance with "full-process management" and the two capital forms of funds and goods are strictly controlled, the safety of the entire model can be ensured, and financing services can be better provided to steel circulation enterprises.

Indeed, the "platform + base" e-commerce model builds a bridge of trustworthy financing, alleviating the inventory capital pressure of products awaiting transaction caused by direct spot sales by manufacturers; extending upward to raw materials, alleviating the pressure on manufacturers' raw material procurement funds; and extending to both ends of the industry chain, solving the credit problems of multiple links in the industry chain.

For banks, the most concerned issues are loan safety and preventing bad debt risks, and e-commerce financing model innovation allows banks to see risks. The platform's real transaction prices can help banks accurately grasp cargo value; the platform's customer credit records can help banks find safer projects. This creates a financial security barrier for banks under the e-commerce model.

Trends in E-commerce Financing Model Innovation

Industry insiders believe that steel e-commerce is currently in the early stage of development, especially the e-commerce financing model is still being explored and practiced, and needs further improvement, perfection, innovation, and development. This is an inevitable development trend of steel e-commerce.

Currently, under the "platform + base" model, a full-process management online supply chain finance model is being implemented: two lows and two highs, namely low risk, low cost, high flow, and high return. Its innovations are:

First, an online supply chain finance model based on "dynamic cargo value" financing. This model changes the traditional static supervision financing model of "warehouse receipt pledge" and fully implements a financing model based on "dynamic cargo value" under full-process management, achieving real-time dynamic balance of "inventory dynamic cargo value + supervised guarantee account balance = bank financing amount", ensuring safe and controllable funds. Currently, two basic financial products can be connected: one is "dynamic inventory" financing for manufacturers, and the other is order financing for downstream customers.

Second, "one-on-one" financial services. "One special session connects to one bank" and "one bank can connect to multiple special sessions". For upstream resource manufacturers in the special session, requirements are: all products are traded online, and all products are included in the full-process control system. All trading customers in the special session settle through the same bank, achieving closed operation and supervision of funds.

Third, real-time full coverage of financial risks. Upstream manufacturers in the special session must open two accounts at the host bank: a supervised margin account and a settlement account. "Supervised margin account balance + controlled dynamic inventory cargo value" is greater than or equal to the bank's financing amount. The excess is transferred to the settlement account, achieving real-time management of financial risks.

Fourth, realizing the credit finance targeted payment function for downstream end customers. Banks often have additional conditions for customers' credit finance, such as designated use and targeted procurement, but in practice, it is difficult to control. If procurement is conducted through the Steel e-commerce platform, through full-process control, this problem is well solved.

Fifth, achieving the scale effect of large flows. Since one special session only connects to one bank, each node of the goods is financed through one bank, achieving closed operation of funds. For banks, each loan disbursement returns to their own pocket at the same time. Through targeted payment and closed operation, a small amount of funds can obtain huge flows. For example, the Xilin special session, with a quota of 1.5 billion to 2 billion yuan, can achieve a flow of 20 billion yuan.

Sixth, possessing the "post-loan management" function. Through information technology, real-time monitoring of customers' physical flow and capital flow can be achieved, enabling phased management of customers to become real-time management, fully reflecting its effectiveness, safety, and economy.

Through the "four flows in one", namely the richness and transparency of business flow, the targeting and openness of information flow, the safety and reliability of capital flow, and the full-process management of physical flow, the "four flows in one" is truly realized. This is also the essence of the "platform + base" e-commerce model and its innovation.