Standard Chartered this week became the latest company to initiate legal action in connection with the suspected metals financing fraud at China’s Qingdao port, signaling losses could climb from the events at the world’s seventh busiest port.
Chinese authorities in May launched an investigation into whether a private metals trading firm, Decheng Mining, and its related companies, used fake warehouse receipts at Qingdao Port to obtain multiple loans secured against a single cargo of metal.
The exposure of foreign banks and various trading firms, including CITIC Resources Holdings Ltd and Mercuria Energy Trading SA, could amount to more than $680 million, according to an aggregation of amounts in company statements, reports, and value estimates of metal.
Local media also said Decheng and its parent owed Chinese banks at least 16 billion yuan ($2.58 billion). Decheng has not commented on the probe.
– Britain’s StanChart said it has started legal action to recoup losses. The lender has made a claim of about $36 million as part of a $40 million dollar loan facility for Zhong Jun Resources, the Singapore arm of Decheng, a spokeswoman told Reuters.
The amount represents less than a sixth of the bank’s total commodity-related exposure to Qingdao port at about $250 million, according to a previous announcement.
– Standard Bank Group said earlier this month it has a total exposure related to the Qingdao port of about $170 million worth of aluminium, and has started legal proceedings in Shandong province to protect its position.
– Mercuria had alumina worth about $44 million stuck at Qingdao port, according to four banking sources with direct knowledge of the situation.
– CITIC said it had begun court proceedings against the operator of a bonded warehouse at Qingdao port. It earlier said it had been unable to secure around 120,000 tonnes of alumina, which traders told Reuters had a value of about $43 million at current market prices.
– Shanxi Coal International Energy Group said it was suing Decheng and its parent for over $177 million in missed payments the two had guaranteed, a move that suggests the scandal is starting to affect other sectors in China.
– Singapore-listed warehouse company GKE Corporation Ltd , a unit of trading house Louis Dreyfus, said in June that an investigation into the port fraud may affect the business of GKE (Shanghai) metal logistics. It has not stated the value of any potential exposure