* Lawsuit suggests scandal at Qingdao port hitting other
* Shanxi Coal says owed $177 mln in payments guaranteed by
Decheng Mining and its parent
* StanChart says has about $250 mln in commodity-related
exposure around port
By Fayen Wong and Chen Aizhu
SHANGHAI/BEIJING, June 27 China's Shanxi Coal
International Energy Group said it was suing the company at the
centre of the alleged metals financing fraud at Qingdao port and
its parent for over $177 million in missed payments the two had
guaranteed, a move that suggests the scandal is starting to
affect other sectors in China.
Shanxi Coal said in a statement to the Shanghai
Stock Exchange on Thursday it was suing three clients over the
missed payments as well as Decheng Mining and its parent,
Dezheng Resources, and another firm that had acted as
No one at Decheng Mining or Dezheng Resources was
immediately available for comment.
Shares in Shanxi Coal were down 3.76 percent at 3.58 yuan at
midday on Friday, after falling as much as 4.3 percent earlier.
Chinese authorities are investigating Decheng Mining over
the alleged duplication of warehouse receipts at China's
third-largest port to obtain multiple loans secured against a
single cargo of metal. Decheng Mining has not commented on the
As details of the potential fraud become clearer, the
possible exposure of various parties to Decheng and its parent
could amount to around $2.8 billion, according to an aggregation
of amounts contained in company statements and Chinese media.
Standard Chartered, a major foreign provider of
commodity financing deals, said on Thursday it had about $250
million worth of commodity-related exposure around Qingdao port,
although not all of that was at risk.
"That is across multiple clients, multiple locations,
multiple types of facilities, not all of which will be
affected," Chief Executive Peter Sands said on a conference
Shanxi Coal said that of the total it was owed, $120.4
million was in dollars and the rest in yuan.
The Qingdao 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.
"This incident illustrates the risks commodity financing and
the practice of inter-company loans pose to the real economy"
said Li Ji, a coal analyst at Galaxy Futures Brokerage.
Authorities have not yet disclosed the amount of metal
involved in the Decheng financing probe, but sources familiar
with the matter said it was about 20,000 tonnes of copper,
nearly 100,000 tonnes of aluminium ingots and about 200,000
tonnes of alumina, the raw material for aluminium production.
That quantity of metal would be worth about $390 million at
Earlier this month, China's CITIC Resources Holding Ltd
said a court was unable to secure more than 100,000
tonnes of alumina it stored at Qingdao port, estimated to be
worth $43 million.
In a further sign of irregularities in China's commodity
financing market, the National Audit Office said this week that
Chinese gold processing firms had used falsified gold
transactions to borrow 94.4 billion yuan ($15.2 billion) from
The audit report covered a period beginning in 2012 and did
not specify an end date. It did not identify any companies or
Spot checks on 25 companies that process bullion, such as
jewellers, showed they made a combined profit of more than 900
million yuan by using the bank loans to take advantage of the
difference between onshore and offshore interest rates, as well
the appreciation of the Chinese currency, the report said.
(Additional reporting by Ruby Lian and Melanie Burton; Writing
by Dean Yates; Editing by Raju Gopalakrishnan)