Copper price set for more falls after suspected Chinese loan fraud

Investigations into suspected metals stockpiling fraud in
China has brought market fears that the price of copper will continue to fall.

Copper reached a one-month low last Tuesday, after a four
day plunge to $US6628 per tonne.

The investigation into whether metals stockpiled at the Qingdao
port, that have been used as collateral to secure loans, fall short of collateral
obligations has been focussed on Decheng Mining, according to Chinese media.

The investigation will try to determine if the same batches
of copper and aluminium had been used to secure different loans.

The Dagang area of the port is now sealed off, with
investigators concerned with 20,000 tonnes of copper, 100,000 tonnes of
aluminium and 200,000 tonnes of alumina.

Other commodities such as iron ore, rubber and cotton are
also used for the broader practice of securing loans, which will be undermined
by any findings of wrongdoing.

Chinese banks will be extremely cautious about financing
loans with commodities, according to Macquarie Group head of commodities
research Colin Hamilton.

Analysts at Barclays and Goldman Sachs have said that
investigations will continue to depress the price of copper, however Chinese
smelter Jiangxi Copper has said that problems with stockpiles at Qingdao will
not affect adversely demand or production involving the metals.

Image: Qingdoanese

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