China Port Metal Scandal Hits CITIC Shares

Posted by George Backwell
Tuesday, June 10, 2014

 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.

The firm said it has sought a court order in Qingdao to secure its metal assets.

CITIC Resources is the commodities trading unit of China's biggest and oldest state-owned financial conglomerate company, CITIC Group Corp. Singapore sovereign wealth fund Temasek Holdings also holds an 11.46 percent in the unit.

"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, the company is not able to accurately assess its impact on the group's alumina and copper stored at Qingdao port or on the group itself," Kwok added.

Banks and trading houses have been checking their exposure to the port and others to see if they are at risk from the issuing of fake receipts.

China's metals sector could have its access to funding squeezed and copper prices could come under renewed pressure if new cases arose.

CITIC joins Standard Bank Group and a part-owned unit of Louis Dreyfus Corp, Singapore-listed GKE Corp., which warned last week of potential losses.

Standard Chartered has said it is reviewing metals financing to a small number of companies in China while Citi Group said it would work closely with authorities, warehousing companies and clients to resolve any issues.

SECOND PORT DENIES PROBLEMS

Pledging commodities to a bank, often using a warehouse receipt as proof of ownership, has become a popular way of raising finance in China, often to skirt restrictions on raising credit and helping drive up stockpiles at some ports.

The Wall Street Journal, citing people familiar with the matter, reported Western banks were concerned that a potential fraud has flared up at a second Chinese port, Penglai, also located in Shandong province,

A port official told Reuters they were not affected by the investigation at Qingdao and business was normal. The official said Penglai Port owned the bonded metal warehouses, rather than them being managed by a third-party warehouse firm or operators.

But while the problems at Qingdao may be an isolated case, questions have begun to play on the minds of traders and bankers doing business in the world's largest raw material importer into whether material they believe they own is secure.

Concerns over the events in Qingdao may push foreign banks to cut their commodity financing business in China, Goldman Sachs said in a note on June 9.

"We believe the developments in Qingdao are likely to continue the significant scaling back of FX inflows from foreign banks into China via commodity financing business."

In March, the bank estimated commodity finance deals in China were worth as much as $160 billion, or about 31 percent of the country's total short-term foreign exchange loans.

COPPER PRICES AT ONE-MONTH LOW

To protect its interests, CITIC said it had applied to the Qingdao courts on June 3 to obtain sequestration orders in respect of the group's alumina and copper. It did not elaborate.

China's Qingdao Port International Co. Ltd. said last week it was assisting in the investigations on fraud related to metal financing but neither the company nor its employees were implicated.

It said its Dagang branch was asked by the Public Security Authority, China's police and security administration, to help with an investigation relating to aluminium and copper products under the name of a third-party cargo shipment agency on behalf of a cargo owner.

Prices of copper have fallen to one month lows since news of the investigation broke last week, while premiums paid for physical metal in Shanghai have nearly halved.

According to industry sources, traders have shipped out some metal from Qingdao Port to more regulated London Metal Exchange warehouses in the region to cut risk and raise funds.

Benchmark LME copper traded just above one month lows of $6,636 a tonne on Tuesday, but analysts and traders warn that the market remains vulnerable to the risk of the Qingdao probe triggering a wider unwinding of financing deals.

(By Donny Kwok and Melanie Burton)

 

 

Maritime Reporter July 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

LNG Carriers GasLog Financial Results Q2 2014

GasLog Ltd. and its subsidiaries, an international owner, operator and manager of liquefied natural gas carriers, has reported its financial results for the quarter ended June 30,

DSME Gets UK Shipyard Consulting Contract

S. Korea's DSME says it is to provide naval vessel production and management consulting services for British defense company BAE. Under the terms of the agreement,

Northrop Grumman Awarded Navy IT Contract

Grumman Corporation informs it has been selected by the US Navy as one of five contractors for the Consolidated Afloat Networks and Enterprise Services (CANES)

Legal

Refiners Seek Jones Act Workarounds as Crude Export Debate Heats Up

As the first U.S. oil condensate exports head to Asia from the Gulf Coast, crude producers and refiners are exploring ways to get around a century-old law that

China Rejects Manila Protests, Laments Detentions

China rejected Philippine complaints on Wednesday about Chinese survey vessels operating in a gas-rich area of Manila's exclusive economic zone, and has lodged

Lukoil Shipped Canadian Crude from Houston

Russian oil major Lukoil has emerged as one of the first companies to buy Canadian crude re-exported from a U.S. port, shipping one cargo last month to its refinery in Augusta,

Ports

Water Monitoring to Continue at Western Gulf Ports

A water monitoring network that helps keep port traffic moving is the responsibility of the Conrad Blucher Institute (CBI) for Surveying and Science at Texas A&M University-Corpus Christi.

Green Marine, ACPA Partner to Reduce Environmental Footprint

Green Marine and the Association of Canadian Port Authorities (ACPA) have entered into a Memorandum of Understanding with the goal of jointly expanding efforts

SC Ports’ Earnings, Volumes Surpass Plans

July cargo volumes deliver strong start to new fiscal year SC Ports Authority reported 2014 fiscal year-end operating earnings of $14.3 million, 20.7 percent over the organization's financial plan.

Finance

LNG Carriers GasLog Financial Results Q2 2014

GasLog Ltd. and its subsidiaries, an international owner, operator and manager of liquefied natural gas carriers, has reported its financial results for the quarter ended June 30,

High Bids in Western GofM Lease Sale

U.S. Government agency BOEM informs that Western Gulf of Mexico Lease Sale 238 attracted US$109,951,644 million in high bids for 81 tracts covering 433,823 acres on the U.

SC Ports’ Earnings, Volumes Surpass Plans

July cargo volumes deliver strong start to new fiscal year SC Ports Authority reported 2014 fiscal year-end operating earnings of $14.3 million, 20.7 percent over the organization's financial plan.

Logistics

Clarksons Appoint New Prospective Chairman

Leading shipping services group, Clarkson PLC, says that James Hughes-Hallett will join the Board as a Non-Executive Director with immediate effect and will take

SC Ports’ Earnings, Volumes Surpass Plans

July cargo volumes deliver strong start to new fiscal year SC Ports Authority reported 2014 fiscal year-end operating earnings of $14.3 million, 20.7 percent over the organization's financial plan.

Port of New Orleans Awards Terminal Build Contract

The Board of Commissioners of the Port of New Orleans awarded a $13.3 million construction contract to Metairie, La.-based Hard Rock Construction LLC today for

 
 
Maritime Standards Naval Architecture Navigation Offshore Oil Pipelines Salvage Ship Electronics Ship Repair Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1676 sec (6 req/sec)