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.

Of all 33 listed steelmakers, 18 firms posted a debt-to-asset ratio higher than 70 percent, with Xinjiang-based Bayi Iron & Steel Co., Ltd. was burdened with the highest debt ratio at 86.46 percent, according to their financial statements.

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

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 Zhang said underlines the hardship of the entire sector.

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 first half of the year, according to data by the China Iron and Steel Association (CISA).

Total debts of the steel sector exceeded 3 trillion yuan (486 billion U.S. dollars) by the end of June, and 43 percent of the total debts, or 1.3 trillion yuan, stemmed from bank loans, the CISA data showed.

Xu Xiangchun, a steel analyst for Mysteel.com, a steel market portal, said 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, Xu said.

Early in July, the China Banking Regulatory Commission warned banks to be careful about risks in lending to iron ore dealers, steel companies and other sectors experiencing overcapacity.

The China International Steel Congress last month estimated the country's steel industry now has an excess capacity between 180 million tonnes and 240 million tonnes.

Such overcapacity means steel companies like Bayi Iron & Steel Co., Ltd. must compete with each other with lower prices in order to survive the fierce competition.

Sitting on the highest debt-to-asset ratio, Bayi attributed its loss of 719 million yuan in the first half of the year to weaker demand from the property and infrastructure construction sectors.

"The demand has dwindled greatly and the steel market is flagging," the steel company said in its note to investors.

In the January-June period, Chinese steel companies posted a combined profit of 2.27 billion yuan, reversing a loss of 2.33 billion yuan in the first quarter, according to the CISA data.

But the profit is brought by 4.32 billion yuan in investment revenues and 3.88 billion in non-operating income, rather than their loss-incurring core steelmaking business.

Under such pressure, Xu said, many steelmakers may have to cut or even suspend their production to get through hard times.

"If their money is draining, selling fixed-assets in exchange of operating liquidity is also another option for steel companies, " Xu said.