Qingdao Port suspends some metal delivery over investigation

The Qingdao Port in East China's Shandong Province has sealed its Dagang bonded metal storage area and suspended delivery of metals from the section, as authorities investigate an alleged fraud into financing of copper, aluminum and alumina, Reuters reported Monday citing sources with knowledge of the matter.

"The bonded zone has been sealed off and no metal deliveries are allowed," said a person at the port, speaking on condition of anonymity because the source was not authorized to speak to media.

A second person, whose firm has copper stocks in another bonded zone at the port, said authorities had ordered the sealing of the Dagang metals storage area.

The bonded storage area, located at the front of Qingdao Port's administrative building, was watched by two security guards.

The Qingdao Port International Co said on Friday that it was assisting in the investigations on fraud related to metal financing but neither the company nor its employees are implicated.

It said its Dagang branch was asked by the public security authorities to help with an investigation relating to aluminum and copper products under the name of a third-party cargo shipment agency on behalf of a cargo owner.

The Qingdao Port, the world's seventh-busiest port, is not a major copper trading centre like Shanghai. A spokesman for the port said he could not immediately comment on the sealing of the Dagang bonded zone.

The amount of metal involved in the financing probe was about 20,000 tons of copper, nearly 100,000 tons of aluminum ingots and about 200,000 tons of alumina, the raw material for aluminum production, said the second source.

The Qingdao Port also has bonded zones for metals storage in other areas and deliveries to those sections had not been affected by the probe, said the source.

News of an investigation into a metal financing fraud at Qingdao Port, where a third-party company is suspected of using single cargoes of metal multiple times to obtain financing, has rattled banks and unsettled markets.

Trading houses and banks have sent executives to the port to physically check on their exposure, while at least one bank has halted new metal financing to some clients in China.

The probe has not affected iron ore shipments and deliveries at Qingdao Port, one of China's largest iron ore terminals. "The ships are still coming in," said a port official.