Citi Mercuria Lawsuit to Rattle Commodity Trade Finance Landscape

A rather significant legal case involving a major US bank (Citi), a metals trading company, and phony warehouse receipts could alter the way that goods move throughout the world via the repo market. The case could be decided any day. The potential cost to banks, both in China and elsewhere: over $4 billion. The dispute is about a deal involving metal-backed loans – $270 million worth – that Citi lent to Mercuria against metal held in Qingdao and Penglai ports in China. The implications seem clear, according to industry sources as reported by Global Trade Review, banks could tighten lending requirements and criteria and that means it will take longer to get deals done. My colleague, Stuart Burns, penned a comprehensive analysis of the case back in December. “Banks have already tightened up loan arrangements around metal financing and if [the case] goes against Citi, another round of reviews could tighten commodity trade finance even more,” according to Burns. According to Linos Choo, a litigator at law firm DLA Piper, in a quote from the Global Trade Review piece, “what is clear is that the case had led to a surge of metal leaving Qingdao and other Chinese ports to … continue reading

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