(Bloomberg) -- A giant state-owned Chinese commodities trader is nursing losses after a shipment of copper from Russia worth nearly $20 million went missing, reigniting fears over fraud in the often secretive market for buying and selling raw materials.

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 should have been delivered last month. It never made it to port, according to people with knowledge of the incident.

Instead, the metal was listed as much cheaper granite and has likely ended up in Turkey, according to the records of the shipping line that handled the consignment, the people said, declining to be identified discussing a sensitive matter.

Staff from the Chinese company have visited Russia to investigate what happened, although they’ve been unable to determine where the smelter is even located, the people said. 

Wuchan Zhongda, based in the eastern province of Zhejiang, declined to comment.

The episode, while unlikely to have global repercussions, is the latest blow to international metals trading and its reputation. The sector has repeatedly found itself tangled in scams, including tales of fake warehouse receipts and containers filled with painted rocks. Trading behemoth Trafigura Group last year fell foul of a missing metals scheme that cost the firm over half a billion dollars.

Favorable Terms

Russia is one of the world’s biggest copper suppliers and China is the largest consumer. Western sanctions imposed on Russian commodities in the wake of the invasion of Ukraine are expanding commerce between the two nations, with Chinese buyers enjoying discounts and other favorable payment terms to keep trade flowing.

The risk is that advantageous conditions at a time of high metal prices could tempt Chinese traders into deals when the relationship with the supplier isn’t well established. Now, Chinese firms rattled by the most recent incident have started conducting internal checks on their own contracts with counterparties, according to the people.

Wuchan Zhongda purchased the metal from a Russian producer called Regional Metallurgical Co. late last year, the people said. The shipment was due to be sold on to a local trader, a common practice in China where smaller merchants take advantage of the bank credit available to bigger rivals.

Cash copper on the London Metal Exchange last traded at $9,821 a ton, so at today’s prices the consignment would be worth nearly $20 million. Last year, China’s total imports of refined copper averaged more than 300,000 tons a month, for use across a variety of industries including construction, power transmission and clean energy.

The cargo left Saint Petersburg at the beginning of 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 conflict in the Red Sea.

On the Wire

China continues to issue heat warnings for Beijing and other regions.

China’s credit engine, which once powered industries and markets all over the world, is stuck in low gear – and set to stay there.

A worldwide shortage of mined copper ore may be starting to filter into refined production, with satellite analysis from Earth-i showing a fifth of smelting capacity for the key industrial metal was offline in May.

This Week’s Diary

(All times Beijing unless noted.)

Thursday, June 13:

  • China to release May aggregate financing & money supply by June 15
  • SNEC PV conference & exhibition in Shanghai, day 3

Friday, June 14:

  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, ~15:30
  • SNEC PV conference & exhibition in Shanghai, day 4

--With assistance from Winnie Zhu and Mark Burton.

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