Citic Resources unable to secure all its metal at scandal-hit Qingdao port

Citic Resources said yesterday a court has been unable to secure more than 120,000 tonnes of alumina worth about US$43 million stored at Qingdao port, deepening fears that firms exposed to a metals financing scam at the port could face big losses.

The mainland port, the world's seventh busiest, has been at the centre of a probe looking into whether a private metals trading firm, Decheng Mining, used multiple warehouse receipts for the same metal cargo to obtain financing. Citic Resources said it would conduct its own investigation and was considering further legal action.

Traders said there was a risk the metal could have been claimed and removed before part of Qingdao Port was sealed off, adding at least two trading houses moved metal as soon as news of the scandal broke.

"Authorities will be able to trace which company claimed the metal but if those stocks have already been liquidated then there's not much Citic can do, especially if the other firm also had proper documentation," said a Shanghai-based metals trader.

The scandal rattled global metals markets, reflecting fears the probe could extend to other ports and prompt a crackdown on using metal as collateral for finance. So far no further cases have been unearthed.

Panic over the scandal has meant that some metal cargoes held at Qingdao Port have been shipped to more regulated London Metal Exchange warehouses, industry sources have said.

The use of commodities as collateral to raise finance is common practice in China and is not illegal. However, duplicating receipts to repeatedly mortgage the full value of an asset is fraud and could leave more than one creditor holding claims to the same collateral.