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.


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.


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

People & Company News

SHIPPINGInsight 2014 Agenda Announced

Annual Conference, Exhibition and Networking Event Brings Together Shipowners and Technology Companies to Address Practical Solutions for Efficient Operations The

Kito Americas Acquires Peerless Industrial

Kito Americas, Inc. announced today that the company has entered into a stock purchase agreement to acquire Peerless Industrial Group from Westview Capital Partners II, L.

Oil Companies Bidding for Blocks in Colombia

Oil companies were bidding on Wednesday for 95 oil areas Colombia is offering for exploration and production in an effort to raise output from around 1 million


Thai Resort Owners Sue State Owned Company for Oil Spill

Business owners on Koh Samet island are suing a state-owned petroleum enterprise for the oil spill that polluted the resort island's beaches last year. More than 50,

Nigerian Piracy Threatens UK Interests: New Report

The UK economy is heavily exposed to lawlessness off the coast of Nigeria, a new report published today by the UK Chamber of Shipping says. The report found that almost all of the UK’s annual £6.

Maine Port City Bans Oil Loading

City councilors in South Portland, Maine, voted late Monday night to ban the loading of crude oil onto tankers along its waterfront, throwing up yet another roadblock


Trading Dutch Well Placed to Pursue Russia Sanctions

The seafaring Netherlands prides itself on being a trading nation, reluctant to let politics get in the way of a good deal. But since the downing, allegedly

Bahrain US$35-M Land Reclamation Contract for GLDD

Provider of dredging services in the United States and a major provider of environmental & remediation services, Great Lakes Dredge & Dock Corporation (GLDD) says

SIA to Honor Honeywell's Gordon Hope

The Security Industry Association (SIA) says it has chosen Gordon Hope, general manager of Honeywell's AlarmNet communications network, as the 2014 recipient of the George R.


Trading Dutch Well Placed to Pursue Russia Sanctions

The seafaring Netherlands prides itself on being a trading nation, reluctant to let politics get in the way of a good deal. But since the downing, allegedly

Navios Announces VLCC Delivery

Navios Maritime Acquisition Corporation, an owner and operator of tanker vessels, has announced that the Nave Electron, a 2002-built VLCC of 305,178 dwt, was delivered

Scorpio Tankers: Latest Financial & Ship Delivery News

Scorpio Tankers Inc. says it has updated its stock buyback program; lists its latest new vessel deliveries, and gives the release date of its second quarter 2014 earnings report.


Heavy Lift & Project Vessels Face Berthing Delays at Indian Ports

Heavy Lift & Project vessels calling at Indian ports are experiencing congestion, which according to the trade is an artifically created situation. They point out that unlike other vessels,

Suicide Attack Escalates Libya Violence, Oil Output Slips

Crude output slips for first time since port deal; fresh clashes in Tripoli and Benghazi. Brega oil port seen open in few days. A twin suicide bombing at a Libyan

New ICTF Boosts Crowley’s Efficiency

The opening of Florida East Coast Railway’s (FEC) new, state-of-the-art intermodal container transfer facility (ICTF) adjacent to Crowley Maritime Corporation’s Port Everglades, Fla.

Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Naval Architecture Navigation Pipelines Pod Propulsion Salvage Ship Repair Ship Simulators
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: 0.1072 sec (9 req/sec)