Dai and his family are currently embroiled in multiple legal disputes with contractors and suppliers over payments. — Bloomberg
CHINESE metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars.
Two decades on, he’s once again fighting for survival.
A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed.
Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co, along with plants held by his wife and son.
Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.
In a decline emblematic of the more overextended corners of Chinese industry, local authorities have already taken over most of Delong’s plants to claw back money owed and to protect employees, according to people familiar with the matter.
The remaining factories are barely running. Major commodity traders severed links some time ago, said the people, who declined to be named as the issue is not public.
According to court notices, Dai and his family are currently embroiled in multiple legal disputes with contractors and suppliers over payments.
Since April, judicial rulings have frozen stakes in Delong subsidiaries worth a total of roughly three billion yuan (US$410mil), according to data provider Tianyancha.
Comebacks are unusual for China’s billionaire class and Dai has long stood out as a man who recovered from disgrace.
Traders and steel entrepreneurs who have done business with him describe the 61-year-old as tenacious, and a survivor.
But hefty losses, dramatic changes in the nickel market over the past two years and tumbling prices have left him contemplating the prospect of relinquishing control, they said in interviews over recent weeks.
Telephone calls to Delong’s headquarters in China were not picked up and its Indonesian unit did not respond to emails seeking comment.
Messages and interview requests sent to the family went unanswered.
Delong stretches from China’s industrial heartland to Indonesia, making Dai one of the country’s most prominent private steel producers and a bitter rival of Tsingshan Holding Group Co’s Xiang Guangda, the nickel magnate whose massive short position almost broke the London Metal Exchange two years ago.
Born in 1963 in a village in the eastern Chinese province of Jiangsu, Dai started his career on the street.
His first job as a teenager was finding and selling scrap metal, until he was finally able to buy second-hand iron-making equipment.
With only a primary-school education, he taught himself steelmaking by reading and quizzing engineers, and he gradually expanded his own operations. By 2000, he was making a million tonnes of steel a year and wanted more.
Jiangsu bureaucrats initially backed his plan for a giant 10-million-tonne steel complex, but later split the project into several different plants, hoping to avoid central government scrutiny.
The plan came undone when Chinese former Premier Wen Jiabao launched a 2004 campaign against rogue investments.
Jiangsu was ordered to punish those responsible and Dai, ultimately accused of tax evasion, was left to languish in detention. He received a five-year sentence in 2009 and was immediately released.
Then came his second act. Just as the Chinese boom began in earnest, Dai found a new calling: making the cheap nickel and stainless steel a more sophisticated economy required.
It was the same bet made by Tsingshan’s pioneering Xiang.
Before its recent troubles, Delong had six million tonnes of stainless steel capacity in China, and a further three million tonnes from its Indonesian joint ventures, making it the world’s biggest supplier after Tsingshan.
But nickel and stainless steel markets have been upended by the rapid expansion of Indonesian production.
Nickel pig iron prices have fallen more than 40% since early 2022 thanks to excess supply, according to data from SMM Information & Technology.
Softer global demand has also dragged down stainless prices, especially for the particular nickel-rich type favoured by Delong.
Violent protests and deadly clashes at its Indonesian plants have not helped bolster confidence among Delong’s investors, creditors and business partners – nor have permitting delays that have limited supplies of nickel ore and ratcheted up costs, even as product prices languished.
Others, like Tsingshan’s Xiang, have moved into refining and higher-grade nickel for batteries to chase higher margins. Dai, though, fell behind.
With limited financing options, Dai is now in talks with Jiangsu local government officials to salvage operations there.
In Indonesia, the company has been trying for several years to sell down its stakes to raise cash.
Last July, the company sold a majority holding in one of its Indonesia projects to CNGR Advanced Material Co, a Chinese precursor maker and supplier to Tesla Inc. — Bloomberg
Alfred Cang and Annie Lee write for Bloomberg. The views expressed here are the writers’ own.
