Authorities in Qingdao have blocked the shipment of some material from the Dagang terminal at Qingdao as they investigate the allegedly fraudulent use of warehouse receipts multiple times to raise finance.

The stop on shipments began last week at Qingdao, which is a major location for China's trade in aluminium, alumina, bauxite, iron ore and coal.

The investigation focuses on allegations of double- or triple-pledged metal in bonded warehouses in the Dagang port terminal of Qingdao.

Traders holding alumina in Qingdao warehouses have been scrambling to understand what effect the investigation will have on their capacity to access their material.

The news has hit Chinese copper premiums, which have dropped by as much as $25.

Although Shanghai copper inventories are not under investigation, concerns about the potential widening of the probe prompted sellers to drop their offers and buyers to withdraw bids, causing trading volumes to sink in the normally brisk Shanghai copper market.

There has also been a steep drop in premiums in South Korea, which has taken in-warehouse offers to about $70 per tonne.

Market participants want to know whether this marks the start of a potential further crackdown on financing.

Here, Andrea Hotter considers the potential consequences for futures spreads and banks' financing of commodities in China.