China’s shadow banking system has long depended on the use of stockpiles of commodity minerals in the country’s warehouses as collateral for loans that do not show up in China’s official lending statistics. Now 123,446 metric tons (tonnes) of alumina, the raw material from which aluminum is made, is gone from warehouses in the city of Qingdao and the alumina’s owner does not know where it is.

Citic Resources, the Hong Kong-listed trading group of China’s state-owned Citic Group, last week asked the court to freeze its inventory of 223,270 tonnes of alumina and nearly 7,500 tonnes of copper at Qingdao’s bonded warehouses at the Dagang docking area. According to the Financial Times, “Multiple parties are trying to establish claim to metal pledged as collateral by Dezheng Resources, a private power and aluminum producer.”

Citic Resources claims it has receipts and other documents supporting its claim to 223,000 tonnes of alumina. What it doesn’t have is 123,000 tonnes of the stuff, and the firm has no idea where it could be. An analyst at Macquarie told the Financial Times, “Everybody has been going through their receipts with magnifying glasses and heading to warehouses to look for their metal.”

Perhaps the stuff is hiding in plain sight somewhere, but the odds are against it. In the meantime, financing for copper and other commodity metal purchases in China have dried up, and until the amount in the stockpiles is determined, it is a fair bet to say that commodity purchases by Chinese traders will evaporate just like those tons of alumina.�