Metal Financing News

Shaken by a fraud investigation into metal financing in the world's seventh-busiest port, banks and trading houses have been made painfully aware of the risks they face storing commodities in China's sprawling warehouse sector. The probe at Qingdao port centres around a private metals trading firm suspected of duplicating warehouse certificates in order to use a metal cargo multiple times to raise financing. Some banks have asked clients to shift metal, used as collateral for loans, to more regulated London Metal Exchange (LME) warehouses outside China or those owned and operated by a single warehouse firm to limit their exposure. "The banks still haven't looked under the hood," said an executive at a bank involved in commodity financing in China, referring to China's warehousing sector.

CITIC Resources Holdings Ltd said on Tuesday that metal it owns at Qingdao port may be affected by a probe into suspected fraud, the latest firm caught up in a scandal that has raised broader worries about the risks of metal financing in China. The probe at the Chinese port, where a third-party firm is suspected of using single cargoes of metal multiple times to obtain financing, has also shaken markets amid fears the problems could extend to other ports and force a crackdown on using metal as collateral for finance. The investigation into the status of aluminium and copper products stored at the world's seventh-biggest port may hit the group, CITIC Resources said, sending its shares down by more than 8 percent to their lowest since May 7.

CITIC Resources Holdings Ltd said on Tuesday an investigation into the status of certain aluminium and copper products stored at China's Qingdao port may hit the group, signalling a possible broader impact on businesses exposed to the port. News of an investigation into a metal financing fraud at the port, where a third-party company is suspected of using single cargoes of metal multiple times to obtain financing, has rattled banks and trading houses and unsettled markets. "At present, the status of the investigation is unknown to the group," chairman Kwok Peter Viem said in a filing to the Hong Kong stock exchange. "Until the status of the investigation is clarified…