Dutch lender ING sued China’s largest bank after suffering losses in a batch of copper deals. It highlighted the risk of servicing the scandal-curse market of commodity trading.
The former claims $170 million in damages from the Industrial and Commercial Bank of China (ICBC). It alleged the latter in breaching the contract terms by emancipating documents for copper transactions without amassing payment.
This resulted in ING having losses on metals exchanged with the largest Chinese copper trader Maike Metals. It banked with ICBC and Triway with ING. However, Triway has not received payment, and ING has been financing its transactions.
This contract breach occurred before Maike’s declaration of a liquidity crisis in September 2022. It was squeezed following raising short-term financing by utilizing its copper stocks as collateral in investing in the Chinese property market.
These investments faced headwinds due to the government’s zero-covid policy and its crackdown on the sector.
The financial troubles of Maike have been included in the list of concerns regarding the metals trading sector. Its main bank is ICBC, with headquarters in Xi’an, yet it was removed in October amid international trade financing problems. Besides, Maike was the largest customer of the branch.
This legal action positioned the biggest Chinese state bank at reputational risk.
Quzhou Nova Bought Copper from the Russian-annexed Ukrainian Region
The Chinese company Quzhou Nova imported at least 3,220 tons of copper alloy in ingots worth around $7.4 million.
This purchase happened between October 08, 2022, and March 24, 2023, at the Debaltsevsky Plant of Metallurgical Engineering. It is located in the eastern region of Ukraine, Donetsk, among the four Ukrainian areas claimed by Russia.
China has not imposed any trade cubs with Moscow. Yet, the US threatened to blacklist international entities for violating Western sanctions. Also, it warned Beijing against supplying Moscow with products listed on the banned US export rules.