Japanese Conglomerate Mitsubishi Corp to Shut Down Chinese Metal Trading Business
Suspected Fraud Leads to Loss of Over $90 Million
Mitsubishi Corp, a Japanese conglomerate, plans to shut down its Chinese metal trading business after suspected fraud by one of its copper traders led to a loss of over $90 million. The company will no longer buy and sell refined metals and mineral resources in the Chinese spot market, nor will it provide related services to local companies.
Decision Made After Announcement of $13.8 Billion Yen Loss
Mitsubishi announced a loss of 13.8 billion yen (S$119.6 million) in its Chinese trading business in its quarterly earnings in November. The company confirmed in December that the loss, equivalent to US$92 million, was due to a Shanghai-based trader whom it had since dismissed.
Copper Fraud Embarrassment for Mitsubishi
The loss is a compliance and risk management embarrassment for Mitsubishi, but it is a manageable financial blow. The company expects to report a full-year profit of 950 billion yen.
Background of the Fraud
The fraud was perpetrated by Gong Huayong, a Chinese national who worked as a trading manager at Mitsubishi Corporation RtM China. Gong made unauthorized deals with local companies, including some that were related to him, people familiar with the matter said. He allowed certain local companies to defer payments for copper concentrate and refined copper, even for counterparties who were unapproved by Mitsubishi.
Consequences of the Fraud
The fraud led to a shutdown of Mitsubishi’s Chinese metal trading business, with the company announcing that it will no longer conduct any new domestic transactions in China. The move is expected to carry a cost of "several hundred million yen". Mitsubishi will, however, continue to export to and from China through other trading units.
Similar Incident in 2019
This is not the first time Mitsubishi has taken a radical decision to respond to a crisis. In 2019, it shut its Singapore-based oil unit after a rogue Chinese trader lost more than US$300 million.
Conclusion
Mitsubishi’s decision to shut down its Chinese metal trading business is a significant development in the company’s history. The suspected fraud by one of its copper traders has led to a loss of over $90 million and has embarrassed the company’s compliance and risk management efforts. The move is expected to carry a significant cost, but it is a necessary step to restore the company’s reputation and prevent similar incidents in the future.
Frequently Asked Questions
Q: What is the reason for Mitsubishi’s decision to shut down its Chinese metal trading business?
A: The company is shutting down its Chinese metal trading business due to suspected fraud by one of its copper traders, which has led to a loss of over $90 million.
Q: How much did Mitsubishi lose as a result of the fraud?
A: Mitsubishi lost over $90 million due to the suspected fraud.
Q: What will happen to the company’s existing deals in China?
A: Mitsubishi will unwind its existing deals in China and close its Chinese metal trading business.
Q: Will Mitsubishi continue to trade with China?
A: Yes, Mitsubishi will continue to export to and from China through other trading units.
