(Bloomberg) — A giant Chinese commodities trader is reeling from losses after a shipment of copper from Russia worth nearly $20 million went missing, reigniting fears of fraud in the often secretive market for buying and selling commodities.
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Wuchan Zhongda Group Co., with sales of 580 billion yuan ($80 billion) in 2023, bought 2,000 tons of refined copper from a Russian smelter that was supposed to be delivered last month. According to people with knowledge of the incident, the ship never arrived at port.
Instead, the metal was listed as much cheaper granite and likely ended up in Turkey, according to records from the shipping company that handled the shipment, said the people, who declined to be identified discussing a sensitive matter.
Employees of the Chinese company have visited Russia to investigate what happened, although they have not been able to determine where the smelter is located, the people said.
Wuchan Zhongda, based in eastern Zhejiang province, declined to comment.
Although this incident is unlikely to have global consequences, it is the latest blow to the international metals trade and its reputation. The industry has repeatedly been embroiled in scams, including stories of fake warehouse receipts and containers filled with painted bricks. Trading giant Trafigura Group was hit with a missing metals scheme last year that cost the company more than half a billion dollars.
Favorable terms
Russia is one of the world’s largest copper suppliers and China is its largest consumer. Western sanctions imposed on Russian commodities in the wake of Ukraine’s invasion are fueling an expansion of trade between the two countries, with Chinese buyers taking advantage of discounts and other favorable payment terms to keep trade flowing.
The risk is that favorable conditions at a time of high metal prices could tempt Chinese traders to make deals if the relationship with the supplier is not properly built. Now, Chinese companies, spooked by the latest incident, have begun conducting internal controls on their own contracts with counterparties, according to the public.
Wuchan Zhongda bought the metal late last year from a Russian producer called Regional Metallurgical Co., the people said. The shipment would be resold to a local trader, a common practice in China where smaller traders take advantage of bank credit available to larger rivals.
Cash copper on the London Metal Exchange last traded at $9,821 per tonne, so at current prices the shipment would be worth almost $20 million. Last year, total Chinese imports of refined copper averaged more than 300,000 tons per month, for use in a variety of industries including construction, power transmission and clean energy.
The cargo left St. Petersburg early this year and was expected to arrive in the Chinese port of Ningbo in late May, the people said, after being diverted around the Cape of Good Hope to avoid conflict in the Red Sea.
On the wire
China continues to issue heat warnings to Beijing and other regions.
China’s credit engine, which once powered industries and markets around the world, is in low gear – and will stay there.
A global shortage of mined copper ore may be starting to filter through to refined production, with Earth-i satellite analysis showing that a fifth of smelting capacity for the key industrial metal was offline in May.
This week’s diary
(All times Beijing unless otherwise noted.)
Thursday June 13:
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China will release May’s total funding and money supply by June 15
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SNEC PV Conference & Exhibition in Shanghai, Day 3
Friday June 14:
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China weekly iron ore port stocks
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Shanghai exchanges weekly commodity inventory, ~3:30 p.m
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SNEC PV Conference & Exhibition in Shanghai, Day 4
–With help from Winnie Zhu and Mark Burton.
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