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Glencore PLC has ceased its supply of metals to Liaoning, China-based metals merchant Huludao Ruisheng after the disappearance of $500 million in copper, the Financial Times reported on Friday.
The FT reported, citing people familiar with the matter, a total of 13 Chinese trading firms had a claim on 300,000 tonnes of Huludao's copper concentrate which was worth ¥5 billion in total, around $740 million.
However, only one-third of that amount was in the warehouses in port city of Qinhuangdao. The Chinese firms involved are expected up to ¥3.3 billion in losses, and last week sent a team to the city to investigate the situation and explore legal action.
In response to this, Baar, Switzerland based commodities trader Glencore and Geneva-based IXM SA have both stopped supplying Huludao Ruisheng, with Glencore has transferred some of its existing stocks from Qinhuangdao to alternative locations, including Qingdao.
The FT reported that the exposure of western firms to the Huludao Ruisheng scandal was limited, with Chinese companies acting as letter of credit agents for the Chinese merchant likely to suffer the brunt of the losses.
Glencore, in particular, is said to have letters of credit in place on some of its cargo bound for Huludao Ruisheng, allowing the company to have hedging arrangements in place to mitigate losses.
https://www.ft.com/content/e5feaeee-e459-44d8-a885-9d04d94b2d51
Shares in Glencore were up 0.6% at 477.27 pence on Friday morning in London, while its Johannesburg shares were down 0.2% at R 93.98.
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