Trade world awaits verdict on Citi-Mercuria Qingdao fraud case

All eyes are fixed on the English High Court, which is due to make a ruling on a dispute between Citi and Mercuria which could send shockwaves through the trading world. Last year at the giant port at Qingdao and a smaller facility at nearby Penglai, the Chinese trading company Decheng allegedly used fake warehouse receipts to borrow multiple times against a single instance of metals. The case has led to a far-reaching fraud investigation in China, but the can of worms that it opened on the wider commodities sector could have significant consequences. It was reported last year that China’s banks have around Rmb20bn (around US$3.2bn) exposed to the fraud probe at Qingdao, while the losses incurred by international banks is thought to top the US$1bn mark. Furthermore, it has led to a re-evaluation of the market by some of the key players: according to sources closely involved, banks have tightened up their lending criteria, meaning that fewer deals are deemed creditworthy and that those deals that are done are taking longer to complete. Trader Mercuria and megabank Citi have had a longstanding relationship, with the latter providing finance for the former to buy and trade commodities around the … continue reading

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Source: CTRM Center

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