Steel Stockpiles Vanish in China

This is a very interesting story out of China that should serve as a canary in the coalmine for precious metals investors everywhere.  Basically, it appears that banks and other companies that have lent money to China’s steel sector with warehoused steel used as collateral have discovered that the steel in many cases is not even there!  If I am reading this correctly, not only were these lenders in trouble due to the cataclysm that is the Chinese steel sector, but their collateral that they assumed would be some cushion is also gone.  From the Reuters article:

Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place.

“Fake warehouse receipts have become a problem for some banks and because of this, many banks have boosted monitoring of existing stocks at warehouses and temporarily stopped accepting steel stocks as collateral for loans,” said a Shanghai-based branch manager from a Chinese bank who declined to be identified as he was not authorized to speak to the media.

There is one major lesson to be learned here for all precious metals investors.  If steel supplies aren’t even legit and no one even wants steel, do you really think there is gold and silver backing all of the “claims” out there?  Not a chance.  Not even close.

Full Reuters article here.

In Liberty,
Mike

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