Tuesday, March 29, 2011

Umm, Folks: "Chinese ‘copper financing’ got even more popular this month"

Creative finance should scare the ingots out of you.
[he meant cathodes -ed]

From FT Alphaville:
So says Standard Chartered bank in their latest Metals Weekly research.
The bank was among the first to bring attention to the fad of commodity-backed financing in China, and now has this update:
Three weeks ago in our report ‘Copper – A reality check from China’ (7 March 2011), we noted that finance deals were proving to be attractive to trading firms by freeing up cash amid tight monetary conditions. Borrowing copper and converting it to cash via banks is proving to be easier and cheaper than conventional borrowing. Discussions with importers this week suggest that this kind of finance has become even more popular since then.

They add — worryingly — that the financing scheme has got so popular that it’s actually better to stop describing copper as a commodity in China completely. It’s now seen just an ‘excellent’ form of collateral....MORE
I'm not seeing anyone else picking up on this but should there be trouble they will, the numbers could get very large.