Citic Global Trade signs deal with Trafigura on joint warehousing, logistics unit

A subsidiary of Citic Securities, China's largest investment bank, has signed an agreement with a unit of global trade house Trafigura to set up a joint ware-housing and logistics unit in China.

The new company will be run by Citic Global Trade (Shanghai), and Impala Terminals, and will focus initially on developing a warehousing, logistics, freight forwarding and terminals business in Shanghai, before expanding across China and abroad, Trafigura said in a statement.

The joint venture will work to "international standards of security and operating processes", the statement said.

The spotlight has turned on China's warehousing network after an investigation into metals financing fraud at the country's third-biggest port of Qingdao surfaced in early June.

Trafigura and Citic's Australian trading unit were burned by the scandal that resulted in cumulative losses among banks and trading houses estimated to top US$1 billion, with local media estimating domestic banks had exposure of more than US$2.5 billion.

Private metals trading firm, Decheng Mining, allegedly duplicated warehouse certificates stored at the port to pledge a metal cargo multiple times as collateral for bank loans.