Three parties who between them trade a variety of base metals with Jinchuan Maike told Fastmarkets on Monday, Tuesday and again on Wednesday that they have halted spot business with the trading house, citing concerns of transaction risk.
One metal supplier told Fastmarkets it was withholding delivery of goods to Jinchuan Maike since the beginning of this week.
Sources spoke on the condition of anonymity given the sensitive nature of the dealings.
The market response came despite a letter from Jinchuan Maike to clients, dated July 28 and obtained by Fastmarkets, assuring business partners that “contracts already signed will continue to be performed” and it would continue to fulfill contractual obligations.
According to the letter, general manager Luo Shengzhang “temporarily stopped performing the duties of general manager due to personal reasons” from Monday July 27.
Internally, Jinchuan Maike's main trading team on July 27 was informed verbally to suspend spot trading business, according to three sources who claimed direct knowledge of the matter.
Spot trading for base metals such as physical copper is highly arbitrage-driven in the Chinese market and could constitute a major part of trading turnover.
Jinchuan Maike (also known as Jinmai) is a joint venture between China's largest nickel producer, Jinchuan, and the country's most prominent metals trading house, Maike. It trades 2.5 million tonnes of base metals every year with an annual turnover of 80 billion yuan ($11 billion), according to the company’s website.
On Tuesday, Jinchuan Maike president Liu Shichao was appointed acting general manager in place of Luo and Wu Jianming became head of the company’s base metals trading and operations, Fastmarkets earlier reported.
Liu and Wu did not respond to multiple requests for comment for this story, in particular that some clients have put their spot business with Jinmai on hold.
A 2018 Shanghai Securities Exchange filing shows Jinchuan Maike is majority owned by Gansu’s state-owned assets commission.
Additional reporting by Archie Hunter in London and Sally Zhang in Shanghai
Clients of Jinchuan Maike have cut exposure to the trader this week, coming at the same time that the company underwent a major management reshuffle.