A major state-owned Chinese commodities trader is suffering losses after a shipment of copper from Russia valued at nearly $20 million disappeared, reigniting fears about fraud in the often secretive market for buying and selling commodities.
The disappearance of the cargo
Wuchan Zhongda Group Co., which had sales of 580 billion yuan ($80 billion) in 2023, bought 2,000 tons of refined copper from a Russian smelter that was due to be delivered last month. According to people with knowledge of the incident, it never arrived at the port.
Instead, the metal was registered as much cheaper granite and likely ended up in Turkey, according to records from the shipping company that handled the shipment, said the people, who declined to be identified discussing a sensitive matter.
Staff from the Chinese company have visited Russia to investigate what happened, although they have not been able to determine where even the smelter is located, the people said.
History of problems in metals trading
This episode, although unlikely to have global repercussions, is the latest blow to the international metals trade and its reputation. The sector has repeatedly been embroiled in scams, including accounts of fake receipts from warehouses and containers filled with painted rocks. Trading behemoth Trafigura Group last year became ensnared in a missing metals scheme that cost the company more than half a billion dollars.
Copper trade between Russia and China
Russia is one of the world’s largest suppliers of copper and China is the largest consumer. Western sanctions imposed on Russian commodities following the invasion of Ukraine are expanding trade between the two nations, with Chinese buyers enjoying discounts and other favorable payment terms to keep trade flowing.
The risk is that advantageous terms at a time of high metals prices could tempt Chinese traders to make deals when the relationship with the supplier is not well established. Now, Chinese companies affected by the most recent incident have begun conducting internal checks on their own contracts with counterparties, according to the people.
Details of the Wuchan Zhongda agreement
Wuchan Zhongda bought the metal from a Russian company called Regional Metallurgical Co. late last year, the people said. The shipment was to be sold to a local merchant, a common practice in China where smaller merchants take advantage of bank credit available to large competitors.
Cash copper on the London Metal Exchange was last quoted at $9,821 per tonne, so at current prices the shipment would be worth almost $20 million. Last year, China’s total refined copper imports averaged more than 300,000 tons per month, for use in various industries, including construction, power transmission and clean energy.
The cargo left St. Petersburg earlier this year and was scheduled to arrive at the Chinese port of Ningbo in late May, the people said, after being rerouted around the Cape of Good Hope to avoid conflicts in the Red Sea.
