Trafigura Unit Seeks to Limit Metals Liability in Qingdao

Jul 24, 2014 10:29 am ET

(Adds copper price in penultimate paragraph.)

July 24 (Bloomberg) -- Trafigura Beheer BV’s warehousing unit asked a U.K. court to determine its liability in metal contracts it issued to a Citic Resources Holdings Ltd. trading arm at China’s Qingdao Port, where officials are probing whether metals were used multiple times as collateral for loans.

Trafigura’s Impala Warehousing and Logistics (Shanghai) Co. sought to affirm contractual limits of the warehouse certificates for Citic Australia Commodity Trading Pty Ltd. for about 2,482 metric tons of copper, according to a June 18 claim filed in London. Impala received an interim injunction on June 27 restricting the Citic unit from making claims against Impala outside the U.K. concerning the warehouse certificates.

Banks and trading companies are checking their exposure to metals stored at Qingdao where public security officials are investigating if companies controlled by Singaporean national Chen Jihong used the same batches of commodities as collateral for loans from several lenders. Chinese banks have about 20 billion yuan ($3.2 billion) of exposure, two government officials said July 16, citing findings of an official probe.

Chen was detained in China, Singapore’s foreign ministry said June 11 and efforts to contact him or his representatives since have been unsuccessful.

Nobody answered three calls to Decheng Mining and Dezheng Resources, Decheng’s parent company in Qingdao. A writ filed against Chen in Hong Kong’s high court doesn’t name a lawyer representing him. Chow Peng, the company secretary of Singapore- based Zhong Jun Resources (S) Pte, another of Chen’s companies, said he couldn’t comment on Chen or his activities in China.

Impala Claim

While Impala’s court proceedings concern metal stored at the same branch of the port, there is no indication in the legal documents that the case relates to the probe.

In its June 18 claim, the Impala unit of Amsterdam-based Trafigura, requested the London court confirm that its liability to Citic Resources’s unit is limited to 100 British pounds ($170.30) a ton of copper, according to the court filings. It also started legal proceedings involving five other companies at the same U.K. court on that date.

Andrew Gowers, a Geneva-based spokesman for Trafigura, the world’s second-biggest non-ferrous metals and bulk commodities trader, confirmed the lawsuits were filed. He declined to comment further. An external Citic Resources spokeswoman, Veronica Hui of PR Asia Consultants Ltd. in Hong Kong, referred to previous statements regarding legal action it is taking to recover metal stockpiles at Qingdao, declining further comment.

Citic Resources

Citic Resources, the commodities trader controlled by China’s largest state-owned investment company, filed a claim against the bonded warehouse operator at Qingdao in the city’s maritime court seeking confirmation it owns alumina and copper held there, it said in a July 7 statement. The company was unable to locate 123,446 tons of alumina from the 223,270 tons it owns at Qingdao, it said in a June 17 statement. It also has 7,486 tons of copper there, it said. The company first announced that it may be affected by the probe in a June 9 statement.

The Qingdao Maritime Court’s office said July 8 it accepted the claim from Citic Resources and said Qingdao Port International Co. is the defendant. An official who answered the phone at the Qingdao Port International’s investor relations department yesterday declined to comment or be identified. The port in eastern China ranked eighth among the world’s largest container hubs in 2012 by volume, according to the World Shipping Council.

Impala Documents

Court documents for the other five cases started by Impala in London aren’t yet available. The companies are units of Standard Chartered Plc, Citigroup Inc., Mercuria Energy Trading SA, BNP Paribas SA and Rabobank International.

“Impala is not actually suing Standard Chartered,” Valerie Tay, a Singapore-based spokeswoman for the bank, said July 22 in an e-mailed response to questions. “As this matter is ongoing before the English courts, we are unable to provide any further information.”

Milou Verhaegh, a spokeswoman for Utrecht, Netherlands- based Rabobank, confirmed the bank was named as a party in an Impala claim and didn’t comment further. Paul Griffin, a spokesman for BNP in London, James Griffiths at Citigroup in Hong Kong, and an official from Mercuria in Geneva who asked not to be identified because of internal policy all declined to comment when contacted by e-mail and phone July 21-23.

China is the world’s largest copper consumer. Overseas shipments to the Asian nation totaled 3.2 million tons in 2013, data from the country’s customs bureau show. The copper contract for delivery in three months climbed 1.5 percent to $7,151.50 a ton on the London Metal Exchange today.

The case is 2014 Folio 734, Impala Warehousing and Logistics (Shanghai) Co. Ltd. and Citic Australia Commodity Trading Pty Ltd, in the High Court of Justice Queen’s Bench Division Commercial Court.

--With assistance from Julia Verlaine in London, Sanat Vallikappen and Andrea Tan in Singapore, Alfred Cang in Shanghai and Peter Chapman in Brussels.