The port city in northeastern China is famous for its Tsingtao brewery that was founded more than a century ago with 400,000 Mexican silver dollars as capital. But in recent years, Qingdao – the beer’s name uses an older spelling – has been attracting other types of metal. As Chinese traders’ appetite for cheap forex funding has increased, piles of copper and aluminium used as loan collateral have accumulated in dockside warehouses.
But at the end of May, Qingdao’s metal stacks started to wobble. Local authorities began investigating whether a Chinese company had pledged the same lots of material to several banks – the equivalent of a homeowner taking out multiple loans for a house while telling each lender they were the only one. With potential losses running into hundreds of millions of dollars, banks and traders scrambled to assess their positions. Standard Bank and Standard Chartered Bank said they were investigating their exposure, while China’s CITIC Resources, asked courts in Qingdao to secure its metal held at Qingdao Port.
“Everybody has been going through their receipts with magnifying glasses and heading to warehouses to look for their metal,” says Vivienne Lloyd, an analyst at Macquarie.
The ripples quickly spread far beyond Qingdao. The London Metal Exchange price of three-month copper, already down 5 per cent for the year, has dropped 4 per cent since the start of last week, to $6,650 a tonne yesterday. New financing deals for copper and other metals in China have dried up.
Commodity traders, banks, financiers and analysts were left pondering a number of questions. Was this alleged financial fraud an isolated case or are other Chinese companies and ports also involved? Will the market be flooded with copper exiting warehouses, putting further pressure on prices? And what might the long term effect be for Chinese metals financing deals, an important part of the shadow banking sector in the country?
Two weeks on, and the investigation at Qingdao still appears to centre on a single group of companies owned by Dezheng Resources, which operates aluminium smelters, power plants and coal mines. Dezheng is reported to own up to 20,000 tonnes of copper and 100,000 tonnes of alumina at Dagang, an older docking area within Qingdao Port.
“The market is still uncertain [about the Qingdao implications],” David Lilley, co-founder of Red Kite, a metals-focused hedge fund and trader, said at a derivatives conference in London this week. “I am somewhat reassured by the fact that?.?.?.?no other area, no other problem has been uncovered.”
Qingdao has not traditionally been a hub for metals financing, but stocks built up rapidly this year. By the end of May, nearly 100,000 tonnes of copper – about 60 per cent of the copper inventories in London Metal Exchange sheds globally – was stockpiled in Qingdao, according to Macquarie. Even so, stocks elsewhere in China are much higher, with bonded warehouse districts in Shanghai holding about 800,000 tonnes of copper. Traders say that facilities at Shanghai and at other Chinese ports are organised and operated to global -standards, often by intern-ational logistics companies.
For this reason, Macquarie says it “doubts that many more, if any, scandals will be uncovered”. Bank of America Merill Lynch was less sure, noting that issuing multiple warehouse receipts for the same tonne of metal was a known issue in China, though it concluded that “copper’s Waterloo is not in Qingdao”. Meanwhile, Doug King, chief investment officer of RCMA Capital, which runs a commodity fund, said this week that he expected the Chinese financing probe to be extended to iron ore and soyabeans.
Fund managers and analysts agree that the Qingdao investigation will have an effect on commodity financing deals in the short term. Goldman Sachs said it expected foreign banks to continue scaling down its collateralised lending businesses in China. As a result, less metal will flow into bonded warehouses, and some of the stocks already there will be shifted.
Macquarie estimates that, due to the lending squeeze, about 290,000 tonnes of copper in Chinese bonded warehouses will be moved, mostly to LME warehouses, either on or off-exchange. But it expects a floor of about 600,000 tonnes of copper to stay in bonded facilities, as part of the established metal-financing transit trade run that is run by large importers and eventually feeds local factories.
“These schemes have been an integral part of the Chinese copper market for some time,” says Nic Brown, head of commodities research at Natixis.
Dezheng could not be reached for comment.
但在今年5月底，青岛的金属库存规模出现了异常波动。当地主管部门开始调查一家中资公司是否用同一批金属向多家银行重复抵押——这相当于一位房主以同一栋房子抵押借入多笔贷款，却告诉每一个借款方自己只向他们借了钱。由于潜在损失可能高达数亿美元，银行和交易商急忙开始评估自己所持的头寸。南非标准银行(Standard Bank)和渣打银行(Standard Chartered)均表示正在评估自己的风险敞口，而中国的中信资源(Citic Resources)则向青岛法院申请查封其存放在青岛港的金属。
专注于金属业务的对冲基金及交易商Red Kite的联合创始人戴维?利利(David Lilley)本周在伦敦某衍生品会议上说：“市场仍不确定青岛事件会带来什么影响。让我稍感安心的是……目前为止尚未发现其他地区存在问题，也没有发现新的问题。”
正因为其他港口的库存更多，麦格理表示“怀疑未来还将有更多丑闻曝光”。美银美林(Bank of America Merrill Lynch)的看法则没这么肯定，指出为同一批金属签发多张仓单的事情在中国已不是秘密，不过该行判断“铜的滑铁卢不在青岛”。RCMA Capital的首席投资官道格?金(Doug King)本周表示，他预计中国的融资调查范围将扩大到铁矿石和大豆。RCMA Capital管理着一只大宗商品基金。
法国外贸银行(Natixis)大宗商品研究主管尼克?布朗( Nic Brown)表示：“这种交易模式在中国铜市场上已存在一段时间了。”