Glencore lead trader released in China over one year after arrest

Glencore trader Hu Qiang has been released without charge 15 months after being arrested in a crackdown on illegal imports of secondary lead waste in China, Fastmarkets has learned.

His release comes after a year of delicate relations between China, home to the world’s largest zinc and lead smelting industry, and Glencore, its primary international supplier of zinc and lead concentrates.

A Glencore spokesman confirmed Hu’s release on Monday August 12 and continued employment with the trading firm but declined to comment further on the reasons for the arrest and the relation between Glencore and China.

Hu was arrested on May 22, 2018, following a Chinese customs agency crackdown on illegal waste imports, which saw 16,000 tonnes of secondary lead material impounded in the port of Lianyungang, in the Jiangsu province.

Well-known figure
The arrest of Hu, a well-known and influential player in the Chinese zinc and lead markets, took the industry by surprise a year ago.

“It is the first such incident in the Chinese zinc and lead industry. Although it was an open secret that Henan lead smelters were buying lead waste for many years, Hu is the first trader under arrest,” a source told Fastmarkets.

Hu started out in the industry at his home-province copper smelter SKS in 1992, before trading concentrates for Xin Guang Group and then joining Glencore Asia Ltd’s Beijing representative office around 1997.

He has been responsible for a large part of Glencore’s zinc and lead concentrates marketing in China and as such, became a powerful figure within the local industry, friends and associates speaking on condition of anonymity told Fastmarkets

In October 2018, Glencore had to give the annual Antaike international lead and zinc conference in Baoji a miss for the first time, surprising many customers and long-time business associates and sparking speculation about the firm’s business strategy in China.

Rogue trades
On June 4, 2018, 16,301 tonnes of material labelled “lead concentrates” and as owned by Henan smelter Jinli, departed Lianyungang port for Germany via a vessel named Alpha Lyrae, according to port records seen by Fastmarkets.

A Fastmarkets investigation showed this as the final reversal of a trade that had continued uninterrupted (unabated) since at least 2011 taking a by-product known as slag from German lead smelter Weser-Metall and shipping it to buyers in China.

Customs records show a total of 391,052 tonnes of lead concentrates leaving Germany for China from 2011 to 2018, though Germany has no lead-producing mines to speak of.

Many countries allow for the imports of secondary lead by-product, which can be used to supplement lead concentrates as a raw material for primary smelters. China, however, does not.

According to a Shenyang customs announcement in May 2018, four people were arrested at the time, while documents and electronic evidence were seized.

The other three people, known to be a second representative from Glencore and two managers working for Henan Jinli Gold & Lead Group, the alleged buyer of the impounded lead waste, were released shortly after the incident, multiple sources told Fastmarkets.

Hu has now been released but it is unclear whether the investigation by the Chinese authorities into shipments of lead materials into the country is over. Glencore acknowledged that such an investigation was taking place in March in its 2018 annual report, but the company has not publicly disclosed any information on the incident since then.

Under the Article 14 of the “Interpretation of the Supreme People’s Court and the Prosecutor General’s Office on Several Issues concerning Application of Law in Handling Crimes of Smuggling,” any unreported import of 20-100 tonnes of prohibited solid waste products that could be used as production raw materials is regarded as a “serious offense,” and for unreported imports exceeding 100 tonnes it is regarded as “particularly serious.”

Mutual reliance, delicate balance
In a world of shrinking import partners, Glencore has continued to supply China with zinc and lead concentrates since the incident but some buyers told Fastmarkets the country has been more reluctant to do business with the trader-miner in the past 15 months.

Despite being the world’s largest miner of zinc and lead, China relies heavily on imports to plug a production gap exacerbated by the loss of sanctions-hit Iran and North Korea as trading partners.

China’s historical reliance on imports from the United States also shrunk after the lead market was caught up in ratcheting trade tensions between the two countries last year. China slapped a tariff of 10% on lead concentrate imports from the US, which was the largest supplier of the material in 2016.

Meanwhile, Iranian and North Korean lead concentrates, once a staple for Chinese smelters, are now a no-go since the US designating Iranian producers as funders of terrorism and placing sanctions on anyone seen to trade with them.

By contrast, Australia has emerged as a key supplier in large part down to higher Glencore production there. Dugald River, MMG’s new zinc-lead mine there, is also now ramped up but only produced 10,639 tonnes of lead in concentrates in the first half of 2019, according to company figures.

However the restart of Glencore’s Lady Loretta mine this year has caused the company’s own-sourced Australian lead production to rise by 70% to 109,000 tonnes and zinc production to firm by 41% to 301,600 tonnes. Much of this additional material will be destined for China.

In 2018, China imported 1.23 million tonnes of lead concentrates, down 4.7% from a year ago. Despite the drop, its import volume still accounted for over a tenth of the world’s mined lead output.

But sources in the Chinese market said that some smelters there were now reluctant do conduct business with Glencore following the crackdown.

“The harm has been done. Several state-owned enterprises now avoid business contact with Glencore if they could, they don’t want to appear to be too close to Glencore. During that time, the Henan smelters were especially staying away from Glencore,” a source in the Chinese smelting industry who declined to be named said.

Glencore’s relationship with wider China Inc is bigger than zinc; China’s state-owned CEFC China Energy lost a quarter of a billion dollars after an agreement to buy a 14.2% share of Russian oil major Rosneft from Glencore and Qatar fell through.

Nevertheless, the company will be hoping that Hu’s release in China brings back some normality between the mutually reliant parties.

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