Recent events in Qingdao Port highlight risks in commodity trading/financing in China
By Wai Yue Loh
In early June this year, a Chinese metal trading company and its affiliates were reported to have been using the same stockpiles of metal commodities stored at Dagang, Qingdao Port, China, for the purpose of collateralising multiple loans. This was discovered amid an apparently unrelated investigation by the government into the activities of a government official in Qinghai Province, and a trail led the investigators to this Chinese metal trading company, whose boss was a close ally of this government official. The allegations are still being investigated and the severity of its impact remains uncertain at this stage; it is however believed that the losses/exposure that may be caused to the banks and commodity traders involved could potentially amount to billions of US dollars.
We have recently received a number of enquiries from clients and are also acting for various sectors of the industry affected by the incident. This article seeks to provide a brief note of our understanding of the matter and the issues involved and to provide some preliminary comments from a risk management perspective.
The incident centres around a Chinese company, Decheng Mining (a Qingdao-based metals trading company), and its parent company, Dezheng Resources Holdings Co, which are reported in the Chinese press and elsewhere to have procured multiple warehouse receipts in respect of each parcel of commodity and to have on-sold such cargo on a landed basis to other commodity traders/banks and/or pledged these multiple warehouse receipts to obtain multiple financing from a number of international and Chinese banks against the same collateral…
Click on the link below to read the rest of the Ince & Co briefing.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from The Lawyer
Briefings from Ince & Co
Surprise: claims for unpaid bunkers under bunker supply contracts are straightforward claims in debt where the passing of property is not required
Also: be specific in tripartite agreements; the right to rely on refund guarantees; and more.