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Iran sanctions, RG steel bankruptcy sink UK steel trader Balli

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(Globalpost/GlobalPost)

By Silvia Antonioli

LONDON (Reuters) - Trade sanctions against Iran and the bankruptcy of U.S. steelmaker RG Steel were among the troubles that forced London-based commodities trader Balli to enter administration, industry sources said.

Privately owned Balli Group plc and two of its affiliates entered administration on March 20, with Deloitte LLP appointed as administrators.

Many European steel traders have been suffering in the past year due to tighter credit availability and a shrinking market in the region, but Balli was hit particularly hard by tighter U.S. and EU restrictions on trade with Iran due to its reliance on business with the Islamic Republic and the Middle East.

"Most of Balli's business was done with Iran, so obviously with the sanctions their ability to do business out of London with Iran was dramatically reduced," a steel trader said.

Balli Steel had traded large volumes of iron ore and steel products such as billet and hot-rolled coils. Platts cited estimates from trading sources that it had handled up to 1 million metric tonnes per year of billet, much of it coming from Turkey.

Sanctions have also pushed other steel firms such ArcelorMittal Temirtau <ISPA.AS> in Kazakhstan and Russia's Metalloinvest, which used to sell a considerable amount of steel to the Islamic Republic, to cut output in the past few years.

The collapse of U.S. steelmaker RG Steel, a large client for Balli, was another blow for the UK trading firm, a second source said.

RG Steel filed for Chapter 11 bankruptcy protection last May, saying it could not overcome the deterioration of the steel market.

Another factor that reduced Balli's cash flow was that it had made a number of unsuccessful investments, including some in iron ore, a second steel trader said.

As pressures on the company mounted, lenders started to withdraw credit, pushing it over the edge, a third source said.

Balli's administrators - Neville Kahn, Phil Bowers and Carlton Siddle of Deloitte LLP - are now assessing the financial position of the firm and in due course will present their formal proposals, Smithfield Group said on behalf of the administrators. It declined to comment on the reasons for the company's collapse.

(This story was refiled to extend timeframe to years from months in sixth paragraph)

(Editing by Jane Baird)

http://www.globalpost.com/dispatch/news/thomson-reuters/130402/iran-sanctions-rg-steel-bankruptcy-sink-uk-steel-trader-balli