Nearly $5 Billion Worth Of Copper Has Gone Missing in China--PUDA Copper Packing Machine

Some Chinese companies are investigating why a commodities storage site in northern China holds only a third of the copper concentrate they finance, according to people familiar with the matter.

A dozen traders, mostly state-owned enterprises, gathered in Qinhuangdao this week after learning of the missing materials amid concerns about borrowers' financial health, people familiar with the matter said. .

The group has a total claim on 300,000 tons of concentrate worth about 5 billion yuan ($740 million), but only 100,000 tons are in storage, people familiar with the matter said. That puts the dollar value of the missing material at about $490 million.

Just a few months later, the Hebei copper price discrepancy played out in a separate dispute in various parts of southern China over missing aluminium linked to a $1bn loan. Scrutiny of commodity financing and warehousing is increasing in China, particularly as volatile global markets put some of the more opaque financing arrangements at greater risk.

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At the center of the latest case is Huludao Risheng Trading Co., a midsize merchant that procures 800,000 to 1 million tons of imported copper concentrate a year for distribution to domestic smelters, according to people familiar with the matter. The company typically relies on larger counterparties to fund materials and then repay the loan with interest and fees after completing the deal.

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No one answered several calls to the company's main number and there was no immediate response to an email seeking comment.

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Risky business

Commodity traders have faced a tougher environment this year as banks have turned cautious following high-profile losses, particularly in the nickel market, and Russia's invasion of Ukraine, which has fuelled huge price swings. This has encouraged alternative financing, in which smaller private firms pledge their goods to large state traders for working capital.

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But that route is also at risk as the growth model that has underpinned China's economy for decades shows signs of strain. Some state-owned enterprises, including the country's top steel mills, have asked units to cut back on operations, including third-party trading, to conserve cash and avoid a liquidity crunch.

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Mysteel said in a report on Wednesday that the impact of the Qinhuangdao dispute on the spot concentrate market was likely to be limited. Chinese smelters that obtain materials from the merchant should be able to use their existing stocks, while traders could reroute goods arriving at the Qinhuangdao plant to other destinations, the report said.