Strategic Metal Report

Reports of Irregularities & Risk at the Fanya Metal Exchange All Just a "Careless Mistake"?

As originally reported here on SM Report, concern about risk associated with irregular operations at the Fanya Metal Exchange arose last week following a report published on the Chinese Securities Regulatory Department's official website.

The report was quickly deleted from the official government website and summaries of the report published by local media were subsequently edited to remove any reference to the Fanya Metal Exchange. Questions about what exactly is happening at the exchange, however, have begun to swirl.

Is the Fanya Metal Exchange, which has become a topic of debate amongst participants in the industry since it began purchasing large stocks of indium in 2013, under investigation by authorities in China?

And will the exchange be able to continue operating, as it currently claims to, by selling millions of dollars worth of minor metals to individual investors each week? (Note: Based on current market prices, Fanya's published purchases, last week alone, totalled more than US$ 50 million).  

As always seems the case with the Fanya Metal Exchange, there are more questions than answers.

While there has obviously been censorship of the original report, discussions about its contents have continued on a number of Chinese business and investment websites, forcing Fanya to respond.

Chinese Regulators Concerned About Irregularities at the Fanya Metal Exchange

The limited number of postings made on SM Report so far this year is fairly reflective of the lack of newsworthy events impacting the minor and electronic metal markets.

With readily available material and limited spot deals, gallium and germanium prices have effectively been pegged for months. Indium, meanwhile, which soared in 2013 on the back of the Fanya Metal Exchange's enormous purchase announcements, has seen prices level off for most of 2014 despite continuing, incredible weekly purchases by the Exchange.

The monotony may have come to an end this week with a report published - albeit temporarily - on the China Securities Regulatory Commission website that explicitly named the Fanya Metal Exchange as an area of very high concern.

(Note: the original article has now been taken off the website, but a .pdf version, with English translation, is available at the bottom of this posting).

According to the report, which appears to summarize the minutes from a recent meeting regarding the Yunnan Stock Exchange Tidying and Reorganization Project, spot inspections of the Fanya Metal Exchange uncovered "irregularities" in the organization's operations, that risk stemming from the Exchange is "very large" and that immediate corrective action should be taken.