Shanxi Coal takes Decheng to court over pay­ment is­sues

China Daily (Latin America Weekly) - - Business - By GAO CHANGXIN

Shanxi Coal Imp&Exp Group Co Ltd, the trad­ing arm of the Shang­hai-listed Shanxi Coal In­ter­na­tional En­ergy Group Co Ltd, said on Fri­day that it would file a 1 bil­lion yuan ($160.51 mil­lion) law­suit against Qing­dao Decheng Re­sources Co Ltd, the com­pany at the cen­ter of a high-pro­file com­mod­ity fi­nanc­ing fraud at the Port of Qing­dao, for missed pay­ments.

Shanxi Coal said it was su­ing Decheng along with five other re­lated par­ties, claim­ing that they owe the com­pany $120.4 mil­lion and 352.5 mil­lion yuan in con­tract pay­ments. In a fil­ing to the Shang­hai Stock Ex­change, Shanxi Coal said that it had en­tered into a se­ries of agree­ments with Decheng from July 2012 to De­cem­ber 2013 to act as the lat­ter’s proxy for the im­port, re-ex­port and do­mes­tic sales of com­modi­ties in­clud­ing alu­mina and elec­trolytic cop­per, which have a wide range of in­dus­trial uses.

Shanxi Coal claimed that it had been di­rected by Decheng to sell its im­ports specif­i­cally to Kwang Nam (Hong Kong) Co Ltd and the HongKong-basedNewTeam In­ter­na­tional Hold­ings Ltd, which are also ac­cused in the law­suit, but the two com­pa­nies failed to make the pay­ments.

The law­suit drew in­vestors’ at­ten­tion be­cause Decheng has been re­ported as the main cul­prit in the Port of Qing­dao scan­dal, where traders al­legedly and re­peat­edly pledged com­modi­ties, mainly cop­per and alu­minum, ware­housed at the port as col­lat­eral to ob­tain fi­nance from banks.

The 21st Century Busi­ness Herald, a Chi­nese busi­ness news­pa­per, re­ported on June 5 that Decheng con­spired with four ware­house oper­a­tors to pledge 100,000 met­ric tons of alu­mina and 2,000 to 3,000 met­ric tons of cop­per to mul­ti­ple banks, and ob­tained fi­nanc­ing of over 1 bil­lion yuan. Au­thor­i­ties at the Port of Qing­dao, the world’s sev­enth busiest, said ear­lier this month that in­ves­ti­ga­tion is on­go­ing, and it hasn’t given any spe­cific names yet.

Stan­dard Char­tered Plc is be­lieved to be one of the lenders in­volved in the scan­dal. Chief Ex­ec­u­tive Peter Sands told Reuters on Fri­day that Stan­dard Char­tered’s to­tal com­mod­ity-re­lated ex­po­sure around Qing­dao Port was about $250 mil­lion. “That is across mul­ti­ple clients, mul­ti­ple lo­ca­tions, mul­ti­ple types of fa­cil­i­ties, not all of which will be af­fected,” Sands told Reuters dur­ing a con­fer­ence call.

Citic Re­sources Hold­ings Ltd, the com­modi­ties trader con­trolled by Citic Group Inc, China’s largest Sta­te­owned in­vest­ment com­pany, said in a state­ment to the Hong Kong Ex­change and Clear­ing on June 18 that it was un­able to lo­cate 123,446 met­ric tons of the 223,270 met­ric tons of alu­mina for which it holds ti­tle documents at the port.

“The group will con­duct its own­in­ves­ti­ga­tion to as­cer­tain why the court has been un­able to en­force its se­ques­tra­tion or­der in re­spect of all of the group’s alu­mina,” Citic Re­sources said in the state­ment.

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