October 31, 2008 / 10:35 AM / 9 years ago

China "kidnapping" alleged as markets turn scrappy

3 Min Read

BEIJING (Reuters) - A British scrap metal trader says he was abducted and held for several days by his Chinese customers in a type of business dispute that could increase as falling prices tempt companies to default.

Anil Srivastav of Goldarrow Metals Ltd said he was detained for several days while seeking $1.2 million in payment from customers in Ningbo, eastern China.

According to a letter from Goldarrow seen by Reuters, James Xu, a representative of its client Ningbo Yibao, detained Srivastav at the Ningbo Sheraton after quarrelling at a container terminal over the contents of an earlier scrap shipment.

Srivastav escaped out the back door of the Sheraton and fled to the Pudong airport, where he was caught and detained for a few days at a different hotel.

Goldarrow says it forwarded shipping documents to release $350,000 of goods in order to secure Srivastav's release.

Yibao's lawyer said another scrap trading company, Zhenhai Guanghe, was involved and that Yibao was not aware of it.

"James Xu's wife works for Zhenhai Guanghe. The company thinks that James should not mingle with another company's business," said Richard Xu of Zhejiang Flower & May Law Firm.

"We will take further legal action, namely suing Goldarrow."

The unusually public dispute comes as sharply falling prices have led many Chinese importers to cancel or default on previously booked cargoes. The scrap metals trade, much of which is done on a spot basis between highly price-sensitive partners, is particularly vulnerable to disputes.

"Over the last two weeks, ISRI has become increasingly concerned with reports from members in the U.S. and around the world of canceled orders, defaults and efforts by buyers in Asia (and China in particular) to extort extraordinary discounts from the contracted prices for shipments of scrap," the Institute of Scrap Recycling Industries said. It issued an advisory to members planning to attend a conference next week in Beijing.

At least one trader planning to travel to the conference has requested personal security after the report, his advisers said.

"We have received calls from companies and individuals that have registered for the conference or have intention to register, asking about the incident. But none of them has withdrawn because of it," said an official with the organizer, the Recycling Metal Branch of the China Nonferrous Metals Industry Association.

Falling prices can spur customs to check cargoes more carefully and companies to scrutinize transactions for any irregularity.

"There are new concerns over issues of payment, with people trying to come to collect payments, going to a big fancy dinner, and ending up being held against their will," said Cecil Leong, managing director of consultancy Bryan Cave International Trade.

Meanwhile, the defaults, and the disputes, keep rising.

"I was ringing my lawyer and he was telling me 'I've got cases left and right'" a metals trader in Shanghai said.

Additional reporting by Rujun Shen in Shanghai; Editing by Paul Tait

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