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Chinese companies seek to move Qingdao metal overseas: trader

(Platts)
Updated: 2014-06-17 09:19
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    Chinese companies are seeking to move copper and aluminum stocks overseas, following a government probe at Qingdao over alleged fraudulent financing, a source at a global trading house told Platts Monday.
   
    At least one Chinese company is offering to sell stocks to the trading house, which has several offices in Asia, the source said.
   
    However, the trader said the move was not expected to affect the market as the volume was small. Aluminum premiums of around $400/mt were also discouraging buyers regard them as too high, the trader said.
   
    He declined to elaborate further.
    
   A South Korean trader said the Qingdao financing issue will have an indirect impact on the market. "It's possible to move the metal into London Metal Exchange warehouses in South Korea, to deliver there for safety," he said.
   
    Japanese and South Korean traders said it only took two to three days to transport the metal from China to South Korea. The bulk freight cost from China's main port to South Korea's Busan was around $20-30/mt, which was lower than $30-40/mt to LME warehouses in Yokohama and Nagoya in Japan. However, the South Korean trader said he has not been asked to carry out such transactions.
   
    Shinichiro Ozaki, equity analyst at Daiwa Securities, said the financing probe was putting negative pressure on aluminum and copper prices.
   
    "There are two types of nonferrous metal demand in China, end-user demand, and for financing, for example, using metal as collateral. The fraud issue will spread concerns that financing-related demand will evaporate, generating a downward price pressure," Ozaki said.
   
    A global producer source said there is no immediate impact of the financing probe outside of China but noted that Chinese small traders in particular would be severely affected.
   
    Last month Chinese authorities launched an investigation into some local trading companies for allegedly re-using warehouse receipts multiple times to secure financing from banks.
   
    Meanwhile, Hong Kong Exchange, which owns the London Metal Exchange, said it is aware of the issue but is not in a suitable position to comment on it.
   
    Preparations continue for the introduction of renminbi-settled commodities products on the Hong Kong platform, dubbed the LME Mini Futures in the second half of 2014, pending regulatory approval and market readiness, it said.
 

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