Latest on the Qingdao Port Missing Metals Case; Details of Company Emerge; More than ￥1 Billion in Loans At Stake

A small/medium trading firm is at the center of the current story. The amount of metal involved is 100,000 tons of aluminum oxide and two to three thousand tons of copper, worth several hundred million yuan. As noted in yesterday's post, Chinese media are reporting that iron ore may also be involved, though if so there may be more than one company involved. The port is operating normally as well; when it was reported in foreign media that all shipments stopped it caused a brief panic in the market. However, given the pattern of these cases, this is truly the tip of the iceberg. As one source said, these cases are exactly like the rehypothecated steel trading cases that are now clogging the courts of Shanghai, though as of yet we don't know how large this problem has grown.

English: China Qingdao port probe fuels Standard Bank, Dreyfus unit worry

"Standard Bank Group is not yet in a position to quantify any potential loss arising from these circumstances," the bank, whose Standard Bank Plc subsidiary conducts commodities trading, said in a statement.

Singapore-based logistics provider GKE Corporation Ltd warned shareholders that it was "assessing the potential impact" of the investigation on its GKE Metal Logistics Pte Ltd unit, a joint-venture 51 percent owned by global commodities merchant Louis Dreyfus.

They are the first companies to publicly discuss the issue since the inquiry came to light on Monday, when Reuters reported the port in northeastern China had halted shipments of copper and aluminu

Chinese media has more details, including the owner of the company being taken into police custody. The company is named Qingdao Decheng Mining. It is a wholesale and retail non-ferrous metals dealer, started in 2005. The company has several shareholders and repeats the cross-ownership pattern seen in the steel-trading cases and in Xiaoshan. On the latter: In wealthy Chinese city, debt guarantees spark default contagion

Private firms often struggle to obtain credit from state-owned banks, which prefer to lend to state-owned firms due to their government backing.

That trend has worsened as economic growth slows, credit conditions tighten, and authorities work to reduce excessive investment and overcapacity in some sectors.

Steel and textile manufacturers in Xiaoshan, like other private firms around the YRD, sought to overcome such obstacles by providing loan guarantees for each other to gain bank credit.

Now defaults by a few companies threaten a chain reaction that could ensnare even profitable firms, as the guarantees have left them on the hook for debts of their bankrupt competitors.

Not only is one firm obtaining multiple loans from banks, but firms are colluding and obtaining multiple loans using the same collateral, up to as many as ten times.

An except from the Chinese article linked below:

A large state-owned trading company official told the 21st Century Business Herald reporter, specific operating practices involved in the financing of copper and aluminum are exactly the same as the steel trade rehypothecation from two years ago. A third party warehousing company and a firm collude, and even collude with bank lending officers, use the same number of goods to issue multiple warehouse receipts, then split them up and find different banks to defraud.

With ￥1 billion in alumnimum, they could easily obtain ￥2 billion to ￥3 billion in loans from various banks.

"Basically behind each copper concentrate or alumina, there are three or four different banks involved with loans using the same collateral, and even some extreme cases, the same batch of goods in different companies, mortgage repeated from different banks, the actual loan amount zoom in ten times."

青岛港风波”追踪：始作俑者青岛德诚

after the Dragon Boat Festival, Qingdao Port investigate trade finance Piandai news on commodity markets set off a new round of controversy.

"This accident is a small and medium private enterprises, mainly engaged in bauxite trade, because the exposure of company funds strand breaks, the boss has to be controlled. Consignment about 10 million tons of alumina and a couple of thousand tonnes of copper, about the value of several hundred million dollars, and the actual warehouse inventory found there are gaps, the former Hong Kong Dragon Boat Festival in Qingdao began to investigate the matter. "a senior industry source told" 21st Century Business Herald "reporter.

21st Century Business Herald reporters from several news sources confirmed that the companies involved in Qingdao Decheng Mining Limited (hereinafter referred to as "Qingdao Tak-shing"). According to sources, the company is headquartered in Qingdao, mainly engaged in bauxite, alumina and some copper concentrate imports.

"Tak-shing, with four different storage company warehouse receipts were issued, and then use the bank information asymmetry loopholes repeated pledge to different banks, the actual exposure of more than 1 billion yuan of bank loans." Sources told the 21st Century Business Herald .

Qingdao Industry and Commerce Administration website, Qingdao Tak-shing, was founded in October 2005, with registered capital of 850 million yuan, the legal representative of Chen Keelung. Operating range of wholesale and retail non-ferrous metals, gold and silver products, metal materials, such as steel. As of press time, the 21st Century Business Herald has not been contacted by the Qingdao Tak-shing, the company has no official website.

In addition, one of the shareholders of the German equity NCN positive group, the official website shows that Germany is the development of the Group is principally engaged in bauxite, alumina, aluminum for investment and development. Including NCN included, Germany is Group shares the culture, including Edward Creation Investments Limited, Qinghai Bank and other seven companies.

Insiders said that this phenomenon is quite common equity mutual SMEs, mainly in order to facilitate mutual guarantees for bank financing.

Previously, according to foreign media reports, China's Qingdao port official conduct of being fraudulent bank loans repeated pledge to investigate whether the presence of Qingdao Port has been suspended iron ore, aluminum and copper departure. This news was to let the market panic. But according to 21st Century Business Herald reporter investigation, but according to this reporter, the facts are not entirely consistent with the foreign reports.

"Steel trade financing pirated"

Many traders and industry, told reporters, "This survey is repeated pledge involved, mainly copper and aluminum, but the number of small, mainly because of Qingdao Port imported iron ore and rubber-based, rather than the larger copper imports the Shanghai and Ningbo Port , alumina imports places Lianyungang -based. "

A large state-owned trading company official told the 21st Century Business Herald reporter, specific operating practices involved in the financing of copper and aluminum and steel trade prevailed two years ago pledged to repeat exactly the same - as a third party warehousing company and corporate collusion, and even collusion bank lending officers, for the same number of goods, issuing more than one warehouse, then split up to look for different companies to defraud multiple banks pledge loan.

Value of $ 1.0 billion to a group of alumina, for example, by repeating the different banks in mortgage financing, companies can easily get two three billion yuan or more financing.

"Basically the back of each copper concentrate or alumina, there are three or four different banks in mortgage repeated, and even some extreme cases, the same batch of goods in different companies, mortgage repeated from different banks, the actual loan amount zoom in ten times. "sources.

Insiders also pointed out that this operation is repeated pledge financing practices widespread concern with the previous trade finance market is different. Repeat with the right corporate pledge financing is the same consignment of goods in different banks to obtain loans, and trade finance is long-term corporate credit issued by domestic banks, after getting goods to quickly get rid of cash, so there are more than two months time window the use of the funds.

"Bank of the two different means of financing risk control are also different. Against pledge financing, banking major regulatory authority vested goods, and for trade finance, corporate banking mainly to confirm whether the real trading background, as well as corporate and other capital flows . "these traders said.

"Qingdao Port warehouse warehouse duplicate financing situation really exists, therefore, the risk may be warehouses of illegal operations, such as steel on warehouse receipts and not on the physical quantity is often the case." Of a futures analyst admits.

"However, since last year, efforts to rectify trade finance investigation involving commodities had increased, we have contacted the foreign banks operating in this area fairly standard, the direction of the bank itself very seriously to prevent risks and regulatory changes." The analyst pointed out.

Since 2009, a number of steel trade enterprises will be injected through the false security company to secure the pledge, repeated charges, mutual UNPROFOR way, a lot of cash in bank loans. After these companies defrauding the bank loans, and transformed into an investment company will invest the proceeds of real estate, stocks, futures, and even high-risk industry usury.

"And the huge size of the steel trade finance market compared to similar tactics copper and aluminum operations repeated pledge Piandai just an isolated phenomenon, it is unlikely large-scale, long, continuous operation, because the entire operation involves many aspects, and now the bank general risks related to the financing of commodities more stringent control, generally before lending will examine whether the goods already pledged. "a medium-sized private trader said.

Iron ore financing requirements "tray"

In addition, a number of news sources confirmed to reporters that the current investigation Qingdao Port is mainly aimed batch of goods involved, the implementation of closed libraries to check other copper, aluminum, iron ore shipments are all normal.

"The cargo is checked concentrated in Qingdao Port Group Chittagong branch. Ports suspend shipments of iron ore situation does not currently exist, other bulk exports also as usual." Said a company who futures.

Qingdao Port Group on June 3 in the official micro-Bo said that although the investigation Qingdao Port Inventory things are true, but did not affect the clearance of goods transport within the harbor. May 31-June 2, 2009, Qingdao port 184 inbound and outbound vessels, including large ore carriers 4. Distributing 1.47 million tons of goods in Hong Kong, including railways, roads, turn the water simultaneously to complete the three-way local acts 736,000 tons of ore.

According to my steel mesh statistics show that as China's third largest iron ore import port, Qingdao port as of May 30 the total inventory of up to 15.96 million tons of iron ore. The incident has created some concern among similar situation repeated pledge financing Piandai iron ore exists.

"Even with financing Piandai case, the amount is very limited, so the iron ore spot market liquidity is far better than copper, and the high cost of storage and transportation, easy to preserve, lower price, therefore, for the simple earn spreads, exchange differences profitable trade finance providers, the iron ore operations are not good targets. "these large state-owned trading enterprises responsible person said.

In fact, iron is more common arbitrage by means of trade finance, the current size of the entire bank loans to finance imports of iron ore at 20 billion yuan, five lines and state-owned joint-stock banks based. Due to the recent significant decline in the price of imported ore, has caused some companies due to their inability to repay bank loans, and by the strength of the state-owned steel mills or traders preferred a "tray" force anti default.

"Often these companies are some of the medium-sized private enterprises, because of the recent drop in price badly mining, shipping is not easy, so they put these goods transferred some large state-owned steel mills, partial payment, and generally agreed 1-3 months After the agreed price to buy back the goods. these mills, in addition you can earn a profit, you can also expand trade income, and cash flow, easier access to financing from the bank. "the official said.

Since the beginning of the iron ore port stocks steadily increased. According to the joint metal mesh statistics May 30, the national 34 ports up to 113 million tons of iron ore stocks, late last month rose 5.98 million tons, refresh history. Meanwhile, iron ore prices continued to fall, until June 2 imported iron ore prices from $ 134.75 in early / dry tonne has dropped to 91.75 U.S. dollars / dry tonne, down nearly 32%.