Qingdao Port Disputes $108 Million Claim for Fraud-Linked Metals

Jul 29, 2014 5:22 am ET

July 29 (Bloomberg) -- Qingdao Port International Co. said it’s disputing a demand by a unit of Citic Resources Holding Ltd. that it deliver copper and alumina linked to a loan fraud investigation in China or pay $108 million in compensation.

Qingdao Port International said it received a claim yesterday from the Qingdao Maritime Court in which Citic Australia Commodity Trading Pty is seeking 223,270 metric tons of alumina and 5,004 tons of copper that it says were stored at the company’s facilities, according to a filing by the port operator with the Hong Kong stock exchange.

Banks, trading companies and warehouse operators are checking their exposure to metals stored at Qingdao where public security officials are investigating whether single units held in bonded facilities were pledged as collateral for loans multiple times.

In a July 7 statement, Citic Resources said it filed a claim in Qingdao Maritime Court against a bonded warehouse operator at the port seeking confirmation it owns 223,270 tons of alumina and 7,486 tons of copper stored there or compensation for the metals. While it didn’t identify the operator, the court later confirmed Qingdao Port International was the defendant.

The claim “is without merit and the company will vigorously contest the allegations” as it has no contract with Citic, Qingdao Port International said in yesterday’s statement.

Veronica Hui of PR Asia Consultants Ltd. in Hong Kong, an external spokeswoman for Citic Resources, said it doesn’t comment on statements from other companies. Nobody answered two calls to the Qingdao Maritime Court today.

Detained Metals

Qingdao Port International said it understands the disputed aluminum and copper were stored at the Dagang Branch of Qingdao Port under the name of Qingdao Hongtu Logistic Co., a third- party cargo shipment agency, according to the filing yesterday.

The metals have been “detained by the relevant public security authority due to the suspected involvement in criminal activities and Qingdao Hongtu is under a fraud investigation,” Qingdao Port International said in the document.

The company didn’t explain where it got the information about Qingdao Hongtu Logistic and three calls to the secretary of the board of directors, which issued the statement, were unanswered. Nobody answered four calls to Qingdao Hongtu Logistic Co.’s offices in Qingdao today.

No one answered two calls to the propaganda office of the Public Security Bureau in Qingdao. A woman who answered the general office number declined to comment or provide her name.

Chinese banks have about 20 billion yuan ($3.2 billion) of exposure to companies at the center of the Qingdao investigation, two government officials said July 16, citing the latest findings of an official investigation.

--With assistance from Feiwen Rong in Beijing and Alfred Cang in Shanghai.