The opaque world of funding commodities trading in China is again under the spotlight.
This time, metals markets are fixated on an incident in the southern province of Guangdong, in which several traders claim they were duped into providing credit against fictitious quantities of aluminum. More than 500 million yuan ($75 million) may have been loaned, backed by stockpiles of the metal stored in a warehouse in the city of Foshan that turned out to be worth significantly less than that.
The amounts being talked about are relatively small, certainly in the context of the aluminum market in China. The world’s biggest producer churned out over $100 billion of the lightweight metal last year, for everything from window frames to car parts. But what’s spooked traders is the similarity to a much bigger scandal eight years ago in the northern port city of Qingdao that caused a crisis of confidence in China’s metals markets.
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