Strategic Metal Report

Misappropriation of Over US$100 Million Linked to Vital Materials Co. Chairman Zhu Shihui

Nearly five years after the Fanya Metal Exchange halted trading in 2015, the last of the stockpile of minor metals amassed by Fanya were finally auctioned off in early 2020. And, so, the book seemed closed on the story of the short-lived Chinese minor metal investment scheme.

But, here we are one year later, and it is beginning to look like there will be more to this story.

On January 10, 2021, a lesser-known, publicly traded Chinese aluminum alloy company (Harbin Zhongfei New Technology Co. Ltd.) released a public statement advising that RMB 831 million (approximately USD 129 million) in company funds had been withdrawn by the company's Actual Controller*, Zhu Shihui, and transferred to companies that he is affiliated with. 

The Continuing Saga of the Fanya Metal Exchange

The ongoing saga of the Fanya Metal Exchange (Fanya) continued last week with the Kunming Intermediate People’s Court levying a fine of RMB 1 billion (about USD 149 million) and sentencing 21 defendants associated with...

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The Fanya Metal Exchange Scrambles to Adapt to New Regulations and Falling Prices

For years the Fanya Metal Exchange has sold itself as a medium for everyday Chinese investors to satisfy their desire for a stake in the world of physical minor metals.

Conference after conference brave staff faced questions and struggled to explain who these investors were, why - it seemed - they all took the same buy and hold strategy and how an independent audit of the exchange's incredible inventory numbers was unnecessary.

How much a year can change.

While the exchange continues to insist that it is positioning itself as a global hub for minor metal transactions, there are now few outside the organization with faith in its ability to succeed.

Since the leak of Chinese government investigations into the Fanya Metal Exchange came to light in December of 2014, the exchange's claimed purchases have effectively ended. And rumors that Fanya's business model was not as it seemed, which had circulated last year, started being openly discussed by those with direct knowledge of the company's operations.

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.