Xinhua reported that the first six months of 2014 were not easy for a slowing Chinese economy. For China's steel companies, times were even harder.

Over half of the listed Chinese steel companies saw their debts approach alarming levels in the January June period, with steelmakers filing their half year results to stock exchanges by the end of August.

According to their financial statements, of all 33 listed steelmakers, 18 firms posted a debt-to-asset ratio higher than 70% with Xinjiang based Bayi Iron & Steel Company Limited was burdened with the highest debt ratio at 86.46%.

Mr Zhang Lin, an analyst with lgmi.com said that "For steel companies, a debt to asset ratio higher than 70 percent means the firm is facing a capital problem."

Mr Zhang expected the debt problem to worsen for steel companies as the sector tends to make substantial investments that usually takes a very long period to mature.

Even for the best performing steel companies, the debt-to-asset ratio remained above 60 percent, a level Mr Zhang said underlines the hardship of the entire sector.

According to data by the China Iron and Steel Association, China currently has 86 steel companies that produced 411.91 million tonnes of crude steel, 362.02 million tonnes of pig iron and 552.25 million tonnes of rolled steel products in the H1 of the year.

CISA showed that total debts of the steel sector exceeded CNY 3 trillion by the end of June, and 43% of the total debts, or CNY 1.3 trillion, stemmed from bank loans.

Mr Xu Xiangchun, a steel analyst for Mysteel said that Chinese steelmakers had expanded too fast over the past few years but such expansion is mainly driven by mounting debts borrowed from banks and other financing channels. As steelmakers owe more, banks are more reluctant to make loans to the sector due to the high debt-to-asset ratio, thus squeezing their liquidity.