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China’s Aluminum Mystery Seen Linked to $1 Billion of Financing

  • Exposure yet to match Qingdao fraud, but probes are spreading
  • Incident is likely to cut liquidity in trading of base metals

Loans related to the alleged over-pledging of aluminum inventories in China may total more than $1 billion, as scrutiny of the nation’s trading and warehousing operations spreads.

The lenders, most of which are state-owned and private traders and don’t include any banks, have at least 7 billion yuan of exposure to companies at the center of the over-pledging allegations, said people familiar with the matter, who asked not to be named as they aren’t authorized to speak publicly.