Trader pledged metals in Qingdao three times for loans, source says
Decheng Mining, at centre of Qingdao probe into commodities financing, obtained more than 2.7b yuan in loans from deals, source says
Decheng Mining pledged the same metals stockpile at the port of Qingdao three times over to obtain more than 2.7 billion yuan (HK$3.37 billion) of loans, a person briefed on the matter said, citing preliminary findings of an official investigation.
The authorities were checking metal inventories worth about 1.54 billion yuan including 194,000 tonnes of alumina, 62,000 tonnes of aluminium and some copper, the person said.
Foreign and domestic banks are examining lending linked to metals at Qingdao amid concern that risks are more widespread on the mainland, where traders use commodities from iron ore to rubber to get funding.
Steps by the central government to rein in credit raised companies' borrowing costs in recent years and triggered a surge in commodities financing deals that Goldman Sachs estimates to be worth as much as US$160 billion.
"The whole Qingdao probe will just keep fermenting, inevitably leading to banks increasing their scrutiny of commodities-backed financing activities," Fu Peng, the chief strategist at Galaxy Futures, said in Beijing.
Bank of China, Export-Import Bank of China, China Minsheng Banking and 15 other mainland banks had lent about 14.8 billion yuan to Chen Jihong, Decheng Mining's owner, and his companies, the person said.