* Court unable to secure more than 100,000 tonnes of alumina
* Metal has a value of about $43 mln at current market
* Adds to worries about losses from financing scam at port
* Chinese and global banks exposed to fraud at port
(Adds quotes from traders, shares, detail)
By Fayen Wong and Melanie Burton
SHANGHAI/SYDNEY, June 18 China's CITIC Resources
Holding Ltd said on Wednesday a court has been unable
to secure more than 100,000 tonnes of alumina stored at Qingdao
port, deepening fears that firms exposed to a metals financing
scam at the port could face big losses.
The Chinese port, the world's seventh busiest, has been at
the centre of a probe looking into whether a private metals
trading firm, Decheng Mining, used multiple warehouse receipts
for the same metal cargo to obtain financing.
The alumina the Chinese commodities trader was unable to
secure via a local court has a value of around $43 million based
on current market prices. CITIC Resources said it would conduct
its own investigation and was considering further legal action.
Traders said there was a risk the metal could have been
already claimed and removed before part of Qingdao Port was
sealed off, adding that at least two trading houses had moved
metal out as soon as news of the scandal broke.
"Authorities will be able to trace which company claimed the
metal but if those stocks have already been liquidated then
there's not much CITIC can do, especially if the other firm also
had proper documentation," said a Shanghai-based metals trader.
The scandal has rattled global metals markets, reflecting
market fears about business practices in China and worries that
the probe could extend to other ports and prompt a crackdown on
using metal as collateral for finance. So far no further cases
have been unearthed.
Panic over the scandal has meant that some metal cargoes
held at China's Qingdao Port have been shipped to more regulated
London Metal Exchange warehouses, industry sources have said.
The use of commodities as collateral to raise finance is
common practice in China and is not illegal. But duplicating
receipts to repeatedly mortgage the full value of an asset is
fraud and could leave more than one creditor holding claims to
the same collateral.
"The company has been notified that in the enforcement of
the sequestration orders obtained by the group, the Qingdao
court has been unable to sequester about 123,446 MT (metric
tonnes) of alumina which the group has stored at Qingdao port,"
CITIC Resources said in a statement to the Hong Kong exchange.
CITIC Resources said it had title to 223,270 tonnes of
alumina and 7,486 tonnes of copper stored at the port pending
payment by and delivery to buyers.
CITIC Resources is the commodities trading unit of China's
biggest and oldest state-owned financial conglomerate company,
CITIC Group Corp. Singapore sovereign wealth fund Temasek
Holdings also holds an 11.46 percent in the unit.
Shares in CITIC Resources, which have lost about 5 percent
since it said on June 10 that it could be affected by the
alleged fraud, were trading up 1.6 percent by 0332 GMT.
The firm said it did not have information on the status of
an investigation by Qingdao authorities and was not yet able to
accurately assess the impact of the alleged fraud.
But firms exposed to the fraud could face competing claims.
"If you're prudent, you'll be insured. If you're not
insured, you could find yourself carrying the can," said a
person at a global trading house based in Singapore.
In March, Goldman Sachs estimated commodity finance deals in
China were worth as much as $160 billion, or about 31 percent of
the country's total short-term foreign exchange loans.
While Western banks dominate metals financing in China,
local banks may also be affected by the investigations into
According to Chinese business daily Caixin, Decheng's parent
company, Dezheng Resources, and its subsidiaries had borrowed a
total of 14.8 billion yuan ($2.38 billion) from Chinese banks.
No one picked up phone calls to Dezheng's office in Qingdao
Global banks including Standard Bank Group and a
part-owned unit of Louis Dreyfus Corp,
Singapore-listed GKE Corp. have warned of potential
losses from the scandal.
Standard Chartered has said it is reviewing metals
financing to a small number of companies in China and
acknowledged there are issues in China around commodities, while
Citigroup Inc said it was working with authorities,
warehousing companies and clients to resolve the matter.
HSBC Holdings said it was assessing transactions on
a case-by-case basis.
($1 = 6.2090 Chinese Yuan Renminbi)
(Editing by Ed Davies)