According to Financial Times on September 27, Glencore, the world’s leading commodity trader, had to suspend a shipment of high purity copper to China due to Maike Metals International facing liquidity problems.

The outlet, citing people familiar with the matter, reported that Maike, one of China’s biggest copper traders, struggled with debt repayments while buying about 661,000 tons of refined copper for a whole year from Glencore.

This figure accounted for 20% of Glencore’s copper sales and concentrates in 2021.

Through a partnership with Maike as its largest domestic broker, Glencore could sell 80% of its copper volume in China. But the company has recently cut down its trade volumes with Maike.

The Financial Times noted that Maike’s financial crisis started earlier this year and its founder He Jinbi just confirmed last month.  

As the company became the top copper importer to China, He began to raise financing from banks by utilizing the constant flow of imported metal. He then used the money to invest in China’s booming property market.

Data from China Lianhe Credit Rating shows that Maike spent $927 million (6.65 billion yuan), or about 60% of its illiquid assets, in real estate by the end of 2020.

However, the communist regime’s crackdown on home speculation and the stringent “zero-COVID” policy have weakened the property sector. As a result, Maike is suffering from huge bad debts.

According to the firm’s 2021 mid-year report, the largest creditors were Xi’an branches of the Bank of Beijing and Industrial and Commercial Bank of China.

At the end of June, Maike had an accumulated credit line extension of around $1.48 billion (10.6 billion yuan). The trading house also had three bonds valued at $460 million. In the latest interview, He said the company still has another bank debt of around $975 million (7 billion yuan).

Two sources told the Financial Times that ICBC Standard Bank has already moved some copper stocks out of China that had been backing its loan to Maike. Meanwhile, JPMorgan has also been selling stocks in bonded warehouses at their added ports in China.

Apart from Glencore, other foreign copper miners such as the world’s biggest mining group BHP and Codelco of Chile have also stopped trading with Maike.

As reported by Reuters, despite market traders thinking Maike will struggle to lead the Chinese copper industry, He is still optimistic about the company’s future.

He said, “We’re actively selling assets and equities to replenish our liquidity and reduce debt.”

He added that the final plan could include “shareholding restructuring, asset restructuring, and debt restructuring.”

And the company was “breaking arms to survive,” which means giving up some parts of the business to rescue the rest.

In August, Maike had already asked for support from the Chinese regime and banks to help solve the liquidity crisis caused by the draconian zero-tolerance approach.

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