On Monday this week:
China’s northeastern port of Qingdao halted shipments of aluminium and copper due to an investigation by authorities, causing concern among bankers and trade houses financing the metals, trading and warehousing sources said on Monday.
…”We were told we can’t ship any material out while they do this investigation,” a source at a trading house said.
The port of Qingdao is China’s third-largest foreign trade port and the world’s seventh-largest port, trading with 700 ports in more than 180 countries, according to its website (www.qdport.com/).
“Banks are worried about their exposure,” one warehousing source in Singapore said.
“There is a scramble for people to head down there at the minute and make sure that their metal that they think is covered by a warehouse receipt actually exists,” he said.
It has since been confirmed that trade in the port goes on but the copper price has come under pressure as banks that fund traders are wondering if their is really any collateral at all and iron ore ore has been drawn in as well:
China’s Qingdao port said it was investigating whether iron ore warehouse receipts were fraudulently used multiple times to raise finance from different banks, Xinhua news agency reported.
…”I think it’s (copper) got more downside to go,” said analyst Vivienne Lloyd at Macquarie. “That (the probe) will have the effect of making the banks extremely cautious about to whom they will issue letters of credit.”
In another sign of concern, copper premiums in Shanghai fell after traders cited concerns about the probe at Qingdao, China’s third-largest port.
“If this is about financing, that’s a lot of metal (that could be unravelled). Banks are concerned and nervous about it,” said a New York trader.
Prima facie you’d think this might be bullish for iron ore prices but not if it freezes bank lending to traders, which will result in bankruptcies, shocks and dumping of what ore there is onto the market.
