WEEK-IN-BRIEF: Qingdao disruption; nickel spreads; BHP copper concentrates

The Qingdao port probe has continued to wreak havoc with markets, spreading further disruption and spooking lenders. Metal Bulletin deputy editor Fleur Ritzema takes a look back at the key stories this week.

The Qingdao port probe has continued to wreak havoc with markets, spreading further disruption and spooking lenders. Metal Bulletin deputy editor Fleur Ritzema takes a look back at the key stories this week.

In China, traders were moving stock to London Metal Exchange-registered warehouses in Korea, Malaysia and elsewhere as credit got tighter in the aftermath of the Qingdao scandal.

“People don’t want to take Chinese warehouse receipts now, and the cif premium has slumped,” one trader said.

The news and subsequent panic has started to impact nickel, a metal which is not believed to have been affected by the initial port probe.

Spot nickel premiums were being reported lower in China this week, and European nearby futures spreads eased, as the probe spooked banks out of financing deals.

In Europe, the Qingdao scandal has weighed on nickel prices and prompted an easing of nearby spreads – which has also happened in the copper market – as traders fear the probe will prompt a flood of material into LME-bonded warehouses.

Our London and Asian teams had the story.

The port investigation focuses on the alleged multiple pledging of metal in bonded warehouses in the Dagang port terminal of Qingdao.

Andrea Hotter revealed this week that around 400,000 tonnes of aluminium has been pledged in Qingdao Port’s Dagang subsidiary, but perhaps as little as an eighth of it actually exists, people familiar with the matter estimated.

The company at the centre of the probe is Decheng Mining, according to media reports at the start of the week.

Zhong Jun, the international trading subsidiary of Dezheng Resources, has links to several western banks and a warehousing firm, according to documents seen by Metal Bulletin.

This is a fast moving story, so keep up with the latest developments here.

Elsewhere, Metal Bulletin sources said the amount of cash that LME clearing members must put into the clearing house’s default fund has risen by over one-third since May to more than $1 billion in June as new regulations take hold.

Mark Burton, meanwhile, revealed that BHP has signed contracts to supply copper concentrates to Chinese smelters with treatment and refining charges of $95.5 per dry metric tonne and 9.55 cents per lb in the second half of the year.

And the increasingly unpopular ferro-chrome benchmark pricing mechanism came under further scrutiny this week. It could soon be abandoned in favour of spot-based pricing while discounts to the headline price continue to undermine the relevance of the quarterly reference, Macquarie said.

Metal Bulletin conducted a poll in May, in which 67% of respondents said that the ferro-chrome benchmark system should be abandoned immediately.

In minor metals, the Fanya exchange continued to dominate discussions. Selenium producers in China have hiked refining capacity for 99.9% selenium powder to meet the Fanya exchange’s standard for delivery, and are likely to become more active on the exchange, according to sources.

Also this week: China confirmed it would cancel its production quota for antimony this year. The Chinese government plans to increase its production of rare earths materials by about 12% year-on-year and keep the tungsten quota flat at 89,000 tonnes.

And finally, as the World Cup kicks off, Hotline has, as a service to the industry, found a bunch of stuff happening that allows you talk about football. Check out our five excuses to talk about the World Cup at work here.

Fleur Ritzema
fritzema@metalbulletin.com
Twitter: FleurRitzema_MB

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