China’s Qingdao Port is counting industrial metals held in some of its bonded warehouses to determine if they match the amount in documents pledged to banks as collateral for loans, said three people with direct knowledge of the probe.
The port is concerned that there has been multiple counting of some batches of metals including copper and aluminum, said the people, who represent banks and a warehousing company who are assisting with the investigation. They asked not to be named as they aren’t authorized to speak publicly about the matter.
Jiao Lankun, an official at Qingdao Port’s press center, said he couldn’t respond and referred inquiries to the company’s board secretary. Neither Jiao nor officials in the general office would transfer calls to the secretary. Shares in Qingdao Port are due to list on the Hong Kong stock exchange tomorrow.
Copper futures on the London Metal Exchange, the global benchmark, fell the most in seven weeks yesterday and closed at the lowest level in almost a month. The probe is negative for copper prices if it leads to any crackdown on the metal’s use in financing transactions, which aid demand, according to Korea Exchange Bank Futures Co.
Copper for delivery in three months fell 0.2 percent to $6,771.50 a metric ton at 2:11 p.m. on the LME. Futures in China rose 0.4 percent. Aluminum in London advanced 0.6 percent.
Metals shipments from the northeastern port had been halted because of the probe into warehouse inventories, Reuters reported on June 2.
The port said in a statement posted on website on June 3 that operations at Qingdao had been “safe, orderly, highly efficient.”
Standard Bank Group has started an investigation into “potential irregularities” regarding metals stocks at bonded warehouses in Qingdao, spokesman Erik Larsen said by e-mail yesterday.
The Johannesburg-based bank will work with local authorities and isn’t yet in a position to quantify any potential loss, Larsen said.
Industrial & Commercial Bank of China Ltd. agreed earlier this year to buy 60 percent of Standard Bank’s markets unit to expand in commodities and currency trading.
Standard Chartered Plc, based in London, is reviewing metals financing to a small number of companies in China, the bank said in an e-mailed statement in response to questions from Bloomberg.
The Qingdao probe will make China’s banks “extremely cautious” about financing transactions, though lenders will continue to assist with funding for shipments to end-users, Colin Hamilton, Macquarie Group Ltd.’s head of commodities research, said yesterday.
Jeremy Goldwyn, head of business development in Asia for Sucden Financial Ltd., said some copper may be moved from China to LME warehouses in South Korea, and possibly Singapore and Malaysia
The investigation may be part of wider efforts by the government in China to crack down on malpractices across the economy and in this sense isn’t unusual, said Andrew Shaw, the head of base metals and bulk commodities research at Credit Suisse Group in Singapore.