One Of China’s Biggest Commodity Traders Faces Liquidity Crisis

Citing “temporary difficulties in logistics, transportation and product sales due to Covid flareups in China,” one of China’s most influential commodities traders is pushing for a government bailout as a deepening property market collapse and ongoing Zero-COVID policy shutdowns has pressured many commodity companies as credit conditions tighten.

As Bloomberg reports, He Jinbi – founder and chairman of Maike Metals International – has asked the government and financial institutions for help after liquidity issues forced his company to delay some payments for imported copper. Additionally, He admitted that some suppliers have canceled deliveries due to concerns over the company’s ability to pay.

The company “is suffering temporary difficulties in logistics, transportation and product sales due to Covid flareups in China,” company founder and Chairman He Jinbi said in an interview on Friday

Bloomberg reports that, according to people familiar with the matter, BHP Group, the world’s biggest miner, is among suppliers that are diverting shipments away from Maike for now. Additionally, Chile’s Codelco, the biggest global copper producer, has reportedly paused sales to Maike.

For now, Maike’s chairman claims the problems are only affecting 10,000 to 20,000 tons of refined copper, which accounts for a very small portion of the company’s supply, but one wonders why he would be urging government aid if this were a one-off, or a mere hiccup?

The company – which historically has been one of the biggest traders of copper in China – holds a substantial amount of the metal in Shanghai’s bonded zone, which is the center of refined copper trading in China. Copper rpices have been rather more volatile in the last week or so, spiking as Maike’s news made headlines and tumbling after The Fed’s hawkishness…

…but, as Bloomberg notes, this instance of financial stress comes after growing caution around commodities financing in the wake of high-profile losses – especially in the nickel market – and huge price volatility fueled by Russia’s invasion of Ukraine. In China, several alleged scandals this year involving missing aluminum and copper ores have further reduced liquidity to the industry.

Watch this space…