One of the world's five largest commodity trading houses, Mercuria, received a cargo of painted rocks instead of copper, for which it had agreed to pay $36 million to a Turkish supplier, Bloomberg has reported, adding that the copper was switched with rocks before the cargo set off for China.
An investigation into the affair revealed that the copper-all 6,000 tons of it divided into 300 containers-was switched gradually during the night to avoid detection. According to Mercuria's Istanbul lawyer who spoke to Bloomberg, the criminals opened the copper containers after anti-fraud seals were attached to them following an inspection. After that, the containers were loaded onto ships that set off for China, where Mercuria needed the copper.
The company paid for the deliveries while the ships were still at sea, finding the truth a long time after the payments were processed.
The case, as Bloomberg notes, highlights how vulnerable even the big commodity trading houses are to fraud. What's more, such crimes or attempts at crimes might get more frequent in the coming years: mining industry and commodity trading executives expect tightening supply of many base metals, and particularly copper, as a result of a strong increase in demand.
Copper prices are currently close to record highs last seen in 2011, and one analyst at least expects demand to exceed supply before this year's end. Demand, Natalie Scott-Gray from StoneX said last month, as quoted by Mining.com, will rise by 5 percent this year while supply will only inch up by 2.3 percent. The longer-term problem is that additional supply takes time to come.
"We see the use of electric vehicles, wind farms and solar requires up to five times the amount of copper," Jeremy Weir, chief executive of Trafigura, said at this year's edition of CERAWeek, as quoted by Reuters. "You can't turn on the switch and produce more copper."
The more expensive a commodity is, the more likely criminals are to try and benefit from the higher prices. Of course, traders will likely up their security to avoid frauds, which will lift prices even higher.
By Charles Kennedy for Oilprice.com
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