Citic Resources sues for return of metals stored at Qingdao port
Company files court action over missing stocks at the port following probe into financing fraud
Citic Resources Holdings has launched legal action against the warehouse operator at Qingdao port for its missing alumina and copper stocks.
Citic said in an update to the Hong Kong stock exchange yesterday it had filed a claim in the Qingdao Maritime Court requiring the operator of the bonded warehouse at the port to confirm Citic's ownership of the 223,270 tonnes of alumina and 7,486 tonnes of copper kept there.
It also asked the warehouse to either release the metal stocks to Citic or offer compensation if they could not be accounted for.
Citic obtained a possession order last month for the metals stored at the port pending payment by buyers and delivery. This followed investigations into a financing fraud by Decheng Mining, a Qingdao-based mining company that allegedly used the same warehouse receipts multiple times to obtain financing.
Citic said on June 17 it was unable to secure 123,446 tonnes of the alumina.
The company declined to disclose the name of the warehouse operator or the amount of compensation it will seek.
"Until the status of the investigation is clarified and the group has conducted its own investigation, the company is not able to accurately assess its impact on the group's alumina and copper stored at Qingdao port or on the group itself," it said in yesterday's statement.
Commodity financing on the mainland has acquired notoriety, with scammers using the same collateral to obtain multiple loans from different banks, which have little means to check stocks.
Christopher Ho, an analyst at UOB Kay Hian, said he did not believe the Decheng case to be an isolated one as it had become increasingly difficult for mainland commodity traders to obtain loans in the past two years because of an industrywide glut.
"It is unclear how many other companies will join Citic in claiming losses," Ho said. "If they do, Citic will not have a high chance of recovering its due."
News portal Caixin said Decheng and its parent, Dezheng Resources, borrowed 14.8 billion yuan (HK$18.5 billion) from mainland banks. The size of the potential losses foreign banks are facing in Qingdao is estimated at more than US$500 million. Standard Chartered last week disclosed an exposure of US$250 million.
Citic is the second company taking legal action in the Qingdao port financing scandal. Last month, Shanxi Coal International Energy Group said it was suing Decheng and its parent for more than US$177 million.
Qingdao Port International, which listed in Hong Kong last month, said it had not received any legal documents against it.
Additional reporting by Eric Ng, Chim Sau-wai, James Griffiths