Chinese Wuchan Zhongda loses nearly $20 million due to missing copper shipment
The giant state-owned commodities trader in China, Wuchan Zhongda Group Co., faced significant losses after a copper shipment worth nearly $20 million from Russia went missing, reigniting concerns about fraud in the secretive raw materials market.
Wuchan Zhongda Group Co.’s sales volume in 2023 amounted to 580 billion yuan ($80 billion). The company purchased 2,000 tons of refined copper from a Russian smelter, and this shipment was supposed to be delivered to China last month. However, the cargo never reached the port.
Suspicious circumstances
According to the records of the shipping company handling the shipment, cheaper granite was listed instead of copper, and the cargo likely ended up in Turkey. Employees of the Chinese company visited Russia for an investigation but were unable to even identify the location of the smelter.
Wuchan Zhongda Group Co., based in the eastern province of Zhejiang, declined to comment. This incident, though not globally significant, once again underscores the reputational risks of international metal trading, which has repeatedly fallen victim to fraud, including fake warehouse receipts and containers filled with painted rocks. Last year, Trafigura Group also faced major fraud, losing more than half a billion dollars.
Trade conditions and risks
Russia is one of the world’s largest copper suppliers, and China is the largest consumer. Western sanctions against Russian goods following the invasion of Ukraine are increasing trade ties between these countries, offering Chinese buyers discounts and favorable payment terms.
However, such conditions in a high-priced metal environment may prompt Chinese traders to make deals with unreliable suppliers. Following the latest incident, Chinese firms have begun internal audits of their contracts.
Wuchan Zhongda purchased the metal from the Russian company “Regional Metallurgical Company” late last year. The shipment was supposed to be sold to a local trader, which is a common practice in China where small traders use bank credit available to larger competitors.
Consequences for international trade
Spot copper on the London Metal Exchange recently traded at $9,821 per ton, valuing the missing shipment at nearly $20 million. Last year, China imported more than 300,000 tons of refined copper per month for use in various industries, including construction, power transmission, and green energy.
The cargo left St. Petersburg earlier this year and was supposed to arrive at the Chinese port of Ningbo by the end of May, after rerouting around the Cape of Good Hope to avoid conflict in the Red Sea.
Conclusion
The incident with Wuchan Zhongda Group Co. highlights the need for stricter control and verification of counterparts in the international metals market. Despite attractive trading conditions, the risk of fraud remains high, especially amid global political and economic changes. It is likely that the Russian government and officials could have resold the metal on the black market or to other regions with high copper demand, such as Southeast Asia. This case again emphasizes the importance of reliability and transparency in international trade to prevent significant financial losses and protect the reputation of market participants.
P.S.
Despite the unpleasant incident, according to Chinese customs data for April 2024, copper supplies from Russia to China increased by almost a third compared to the same period last year, reaching 20,000 tons and $174 million. Kazakhstan ratified the protocol on the transit of Russian oil to China. On May 18, Assistant to the President of the Russian Federation Yuri Ushakov noted the successful negotiations between Vladimir Putin and the President of the PRC Xi Jinping. Xi Jinping earlier stated that the relationship between China and Russia has stood the test of the international situation.