Duplicate storage certificates used by at least one minerals trader at the port of Qingdao are making Chinese banks even more reluctant to provide letters of credit (L/Cs) for commodities traders.

Chinese banks are already making L/Cs hard to come by for traders in iron ore (DC World News, 9 June 2014) as well as dealers in copper and aluminium in the wake of the government's crackdown on the use of commodity imports as collateral for financing.

Double collateral

The duplicate storage certificates appear to have allowed collateral to be used twice against the same goods, prompting fears that very large amounts of money may have been raised due to lax practices at the Chinese port.

An official investigation has been launched into suspected fraud at Qingdao port, which has a reputation for being under-regulated.

Bank investigations

Meanwhile, several banks are reportedly examining very carefully whether they have been defrauded by falsified storage certificates and because of this, L/Cs have largely evaporated for legitimate commodities traders in some quarters.

Citigroup and Standard Chartered are amongst the banks reportedly concerned about fraud at the Chinese port.

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