Citic Resources Can’t Locate All Materials at Qingdao Port

Jun 18, 2014 1:45 am ET

(Updates to add analyst’s comment in fourth paragraph.)

June 18 (Bloomberg) -- Citic Resources Holdings Ltd., the commodities trader controlled by China’s largest state-owned investment company, said it’s missing more than half its alumina stored at Qingdao Port amid a probe into lending.

A Qingdao court was unable to locate about 123,446 metric tons of its alumina held at the port, Citic Resources said in a statement to the Hong Kong stock exchange. The company had obtained sequestration orders for its assets at the port from a local court, Citic Resources said last week in a statement.

Qingdao Port is counting industrial metals held in some of its bonded warehouses to determine if they match the amount in documents pledged to banks as collateral for loans, three people with knowledge of the probe said on June 5. The port is concerned that there has been multiple counting of some batches of metals including copper and aluminum, said the people.

“Citic Resources’ loss is just the tip of the iceberg,” said Helen Lau, a Hong Kong-based analyst with UOB Kay Hian Ltd.. “There will be many more companies found to be victims as the investigation over multi-counting of metals evolves.”

Citic Resources shares gained 3.2 percent to HK$1.28 as of the noon break, compared with a 0.3 percent decline in the city’s benchmark Hang Seng Index. The stock has gained 42 percent in the past year, compared with a 9.3 percent gain in the index.

Collateral of Metals

Foreign and local banks are examining lending linked to metals at Qingdao amid concern that risks are more widespread in China, where traders use commodities from iron ore to rubber to get funding.

Citic Resources holds title documents to 223,270 metric tons of alumina and 7,486 metric tons of copper it has stored at the port, the company said. The 123,446 metric tons of its missing alumina could be worth 306 million yuan ($49 million), according to Bloomberg calculations using the latest medium spot price of alumina at Qingdao port. Alumina was priced at 2,480 yuan a ton today, according to consultancy Mysteel.com.

“The group will conduct its own investigation to ascertain why the court has been unable to enforce its sequestration order in respect of all of the group’s alumina,” Citic Resources said in the statement. The company will also consider “legal proceedings if necessary,” it said, without elaborating.

Citic Resources is not able to accurately access the impact to the group’s alumina and copper stored until the status of the investigation at Qingdao port is clarified, the company had said in a June 10 statement.

--With assistance from Simon Lee in Hong Kong.