Qingdao metals fraud probe focusing on Decheng Mining
Banking sources say mining company's owner detained as part of metals fraud investigation
China's investigation of whether metals stockpiled at Qingdao Port fall short of collateral obligations used to secure loans is focused on Decheng Mining, said two bankers assisting with the probe.
Decheng's owner, Chen Jihong, has been detained by public security authorities amid the investigation at the northeastern port and a separate probe in northwestern Gansu province, said the bankers, who asked not to be named.
Investigators are trying to determine if Decheng used the same batches of copper and aluminium stored at the port as collateral to secure multiple loans, said the bankers. Their banks have extended credit to Decheng.
Any findings of wrongdoing at Qingdao risks undermining a broader practice in which traders in China use commodities from iron ore to rubber to get funding. Analysts at Barclays and Goldman Sachs Group have said the probe may weigh down the price of copper, already the worst performer among the six main materials traded on the London Metal Exchange this year.
The probe may affect metals stockpiles at Qingdao held by Citic Resources, the unit of China's largest state-owned company said on Tuesday.
Standard Chartered said last week it was reviewing financing to some companies in China and Standard Bank Group started looking at "potential irregularities" with metals at Qingdao. Citigroup said it would work closely with authorities and warehousing companies to resolve any problems for clients.