China Scrambling. . .Rehypothecated Copper, Aluminum Missing

[theo]

http://www.zerohedge.com/news/2014-06-0 ... uminum-mis

"Banks are worried about their exposure," warns one warehousing source, "there is a scramble for people to head down there at the minute and make sure that their metal that they think is covered by a warehouse receipt actually exists."

The rehypothecated catastrophe that we discussed in great detail here (copper financing), here (all commodities), and here (global contagion) appears to be gathering speed as the China's northeastern port of Qingdao has halted shipments of aluminum and copper due to an investigation by authorities after they found "there is a discrepancy in metal that should be there and metal that is actually there."

Copper prices are tumbling already (despite Gartman's most recent prognostication on Dr. Copper's China recovery meme) as the world's 7th largest port disallows any shipments until the probe is complete.

"It's such a massive port I would think virtually everybody has exposure," warned one analyst, adding that this will be bearish for metals as "a lot of Western banks will try to offload material and try not to deal with Chinese merchants."

Reuters reports,

China's northeastern port of Qingdao has halted shipments of aluminium and copper due to an investigation by authorities, causing concern among bankers and trade houses financing the metals, trading and warehousing sources said on Monday. Port authorities could not immediately be reached for comment. China has a public holiday on Monday.

"We were told we can't ship any material out while they do this investigation," a source at a trading house said. The port of Qingdao is China's third-largest foreign trade port and the world's seventh-largest port, trading with 700 ports in more than 180 countries, according to its website (http://www.qdport.com/).

"Banks are worried about their exposure," one warehousing source in Singapore said.

"There is a scramble for people to head down there at the minute and make sure that their metal that they think is covered by a warehouse receipt actually exists," he said.

Here is the best response from the comment section:

"As Chris Martenson nicely sums up what wealth and money are.......There are 3 main types of wealth. Primary wealth which consists of real productive things such as oil wells, productive farmland, fisheries, mines, etc. There is secondary wealth which are the byproducts of primary wealth such as oil, fish, the commodities which come frome mines. Lastly, there is tertiary wealth which consists of things such as stocks, bonds, etc. Tertiary wealth is simply a claim on the first two types of wealth. The current system is diverging with contracting primary & secondary sources of wealth, and expanding forms of tertiary wealth.

Problem not solved, problem worsening & headed for a crash."

[blackrabbit]

This is a weird story. No metal to back the paper so metal prices go down?

[Kurr]

That's what I was thinking as well. With a large drop in "supply" and demand staying the same, prices should shoot up, in my thinking.

[Mossy]

The paper metal is probably dropping. Physical is probably not moving as people hang onto what they have. Just a guess.