BEIJING (Reuters) - The Chinese authorities have frozen part of commodity trader Trafigura’s investment in a Chinese copper smelter as part of a years-long probe into the Swiss firm’s oil trading, according to documents from the police and banks reviewed by Reuters.
In October last year, police in the northern Chinese city of Cangzhou, froze $32.9 million Trafigura Pte Ltd had injected into the metals project, a joint venture with Chinese metals producer Jinchuan Group Co Ltd [JCGRP.UL] in the southwestern city of Fangchenggang, documents dated Oct. 28, 2015 show.
The documents were from the Cangzhou Police Bureau and a Bank of China branch in Fangchenggang, which authorized the move. The frozen funds represented just over a third of the $94.4 million investment Trafigura Pte Ltd had pledged.
Investigators arrested Tian Meng, Trafigura’s Beijing-based oil marketer in August 2014, following a complaint to police by private Chinese trader Qingdao United Energy, alleging it had lost $32 million from trade financing deals arranged by Tian without its knowledge.
Tian was released on bail last month - without being charged - after more than two years in detention. Reuters couldn’t reach Tian for comment.
Trafigura declined to comment on the fund freeze. The Cangzhou Police Bureau and Cangzhou prosecutors’ office declined comment. Jinchuan did not respond to requests for comment. Li Yixing, founder of Qingdao United Energy, said he was briefed by the police of the fund freeze, but declined to comment further.
The events highlight the complexity of doing business in China, a key market for the Swiss merchant which deals in everything from oil to copper. Trafigura’s investment in the smelter was seen as an important step for Trafigura in expanding its footprint in the copper concentrates and metal market in the world’s top commodities consumer.
Senior sources at Trafigura have repeatedly said the company believes the dispute is a commercial one and is not a matter for police or state prosecutors.
The Fangchenggang smelter, in Guangxi province, is not connected to the trading being investigated.
Senior industry sources said the freezing of Trafigura’s investment should not have a material impact on the Swiss firm given it reported $97.2 billion in revenue and $2.6 billion of gross profit in 2015 as shown in Trafigura’s annual report.
The one-year freeze expires next month, the documents showed.
Authorities also detained Li Bo, head of Trafigura’s Beijing-based oil operation, in June 2015, as part of the investigation into the same case. Li was released later on bail last February and has not been charged.
Police targeted Trafigura Pte Ltd because it was the counterparty of the Qingdao firm in the alleged trade financing deals, according to Qingdao United Energy’s Li and another source with direct knowledge of the probe.
Additional reporting by Dmitry Zhdannikov in London; Editing by Josephine Mason and Martin Howell