Details of the shipments, which Metal Bulletin obtained in the course of an extensive investigation into claims that high-arsenic copper concentrates have been entering China in contravention of the country’s customs laws, are likely to be of interest to the authorities there as they seek to clamp down on pollution, as well as to campaign groups lobbying for greater environmental controls in China and in the metals industry as a whole.
The shipments will also be of interest to the many suppliers of concentrates who have made major investments in concentrates blending and processing businesses in the past few years in order to ensure the concentrates they sell to China comply with local import laws.
For the avoidance of doubt, Metal Bulletin does not believe the mining and trading companies identified in export records as the shippers and consignees for the cargoes have acted illegally, as they are understood to have transferred ownership of the goods to end-buyers in China before the cargoes left Peru.
Legal liability for a contravention of a country’s customs rules would be likely to lie with the parties that held title to material at the point of import, and the shippers and consignees involved in the trades would not have contravened import rules if they had sold the cargoes to the end-buyers on a free-on-board or ex-works basis, John Whittaker, a partner at Clyde & Co who acts for some of the world’s largest commodity and natural resources companies, told Metal Bulletin, speaking in general terms.
Nevertheless, some commentators have criticised the trading companies who sold the material in Peru on ethical grounds for their decision to maintain direct or indirect commercial relationships with counterparties that appear to be breaking the law by shipping high-arsenic cargoes to China.
Maintaining such a relationship appears to run contrary to the due-diligence commitments companies ought to make under the United Nations Guiding Principles on Business and Human Rights, according to Andreas Missbach, head of the commodities, trade and finance department of the Berne Declaration, a campaign group based in Switzerland.
"It's clear that trading companies have responsibility for the products they sell, even after the point of sale. If they are able to see what is happening to the product after they've sold it, and have concerns about what their business partners are doing with it, they should not be doing business with them," Missbach told Metal Bulletin.
Nikos Nomikos, professor of shipping risk management at City University London’s Cass Business School, said that the trading companies should show a greater interest in what is happening to the products they have sold, given the level of concern about the safe processing of high-arsenic concentrates.
"They will be cognizant of the fact they are selling a product that’s high in arsenic, and given that there is a lot of concern about how those types of products are handled, they should show more of an interest in what’s happening to it after the point of sale," Nomikos told Metal Bulletin.
Arsenic levels exceed 8%
Among the containerised shipments sent from the Peruvian port of Callao to China last year were 15 parcels of Sociedad Minera El Brocal concentrates with a free-on-board value of nearly $30 million, and 21 cargoes worth nearly $25 million shipped by Doe Run Peru, which operates the Cobriza mine, official customs declarations and cargo manifests obtained by Metal Bulletin show.
While Minera El Brocal and Doe Run Peru did not respond to a request for comment, several trade sources told Metal Bulletin that mining companies in Peru typically transfer title to the shipments to trading partners prior to export, and as such they were not involved in their subsequent shipment to China.
The arsenic content for the cargoes is typically not listed in official customs declarations, but assay details included in some of the records show that four of the El Brocal cargoes had an arsenic content of more than 8%, more than 15 times over the legal limit imposed by China’s General Administration Quality Supervision, Inspection and Quarantine (AQSIQ).
Most countries allow smelters to import and process complex concentrates providing they comply with strict plant-level emissions and waste management regulations, but because China’s smelting and refining base is so vast, regulators took the view that monitoring impurity levels at the point of import would be the most effective way of imposing environmental controls on the sector, market sources told Metal Bulletin.
"This is obviously a matter for the Chinese authorities to crack down on. It bespeaks a failure of the regulations in China, and presumably these cargoes weren't stopped and will just be absorbed into the system in one way or another," Dr Paul Johnston, principal scientist at the Greenpeace Research Laboratories at Exeter University and scientific adviser to Greenpeace International, told Metal Bulletin.
"All that arsenic has to go somewhere, and one has to suspect that it isn't being dealt with in a particularly responsible or sustainable manner, because there is a very limited market for arsenic as a product,” Johnston told Metal Bulletin, adding that the organisation’s investigations team is interested in reviewing the matter.
AQSIQ did not respond to a request for comment on whether the cargoes had been inspected.
Four of the Doe Run Peru cargoes had an arsenic content of between 0.52% and 0.78%, according to official records produced by the Superintendencia Nacional de Aduanas y de Administración Tributaria (Sunat), Peru’s national customs and tax agency.
The records provide partial evidence of what many trading and mining professionals believe is a sustained, large-scale contravention of the AQSIQ rules, which were introduced in 2006 as a countermeasure against the potentially severe environmental and public health problems associated with the smelting and refining of complex copper concentrates.
The shipments to various Chinese ports including Dalian, Huangshi and Zhapu have taken place during a surge in the production of high-arsenic concentrates in Peru and Chile, and a simultaneous spike in the processing fees that smelters charge to treat high-arsenic material.
Several concentrates traders that Metal Bulletin has questioned about the shipments over recent months have suggested that the cargoes have been blended with other clean concentrates inside China and sold on greatly improved commercial terms, enabling the parties involved to collect percentage returns of a size not commonly seen in the narrow-margin business of concentrates trading.
However, the high levels of arsenic contained in some of the cargoes have raised concerns about whether there is a sufficient volume of clean concentrate available locally to blend the arsenic content down to a level that would make them environmentally safe for smelters to treat.
“Mixing concentrate streams for the purposes of dilution doesn’t actually make the stuff disappear, so you’ve got to consider this in terms of the mass balance. If you import a tonne of arsenic you’ve got to manage a tonne of arsenic, and irrespective of how you do that, you’ve got to consider the impact on mass emissions and contamination of the surrounding areas,” Greenpeace’s Johnston told Metal Bulletin.
Cargoes were sold locally
Of the 15 parcels of El Brocal concentrates shipped to China this year, twelve were consigned to Werco Trade AG, the Lucerne-based trading house founded by former MRI trader Marco Wermelinger.
Metco Suisse GMBH, a separate company chaired by Wermelinger, was the consignee in 18 of the 21 Cobriza shipments, the Sunat documents show.
Wermelinger, who is the president of Werco Trade, said his company sells and finances concentrates in Peru on a domestic basis, and is not responsible for selecting the shipping destination of those cargoes.
As such, Werco Trade and Metco were not responsible for importing the concentrates into China, he told Metal Bulletin.
“Our involvement (if any) is local trading and financing and goes up to maximum fob (we sell on fob basis). Needless to mention that responsibility after material has been loaded is with the buyer of the goods. It is the buyers’ decision and responsibility where to take the parcel,” Wermelinger told Metal Bulletin.
Wermelinger added that Werco was not the end-buyer of El Brocal cargoes, and said the company did not hold title to the material during shipment or import.
“Trading or financing materials like El Brocal in the local Peruvian market is not against any restrictions, nor is it contradicting any rules or regulations,” he said.
Wermelinger did not respond specifically to the assertion that Werco and Metco have fallen short of the ethical standards expected of commodities trading companies, but suggested that the facts and comments put to him for comment could portray a “completely wrong picture” of the matter. He did not respond to a request to elaborate on any perceived inaccuracies in the information that Metal Bulletin presented to him.
“The obligations, applicable laws and regulations and liabilities are very clearly set out in our agreements with the respective counterparties,” Wermelinger said.
“Werco Trade acts as financing partner to small, medium and large mines and to trading companies in Peru and there is nothing else we or our partners need to comment on,” Wermelinger told Metal Bulletin.
The largest of the six shipments consigned to Werco and Metco Suisse with a documented arsenic content was a 3,238-wmt parcel shipped in late June, which had an arsenic content of 8.42% and a fob value of $2.81 million.
Official customs declarations for two other cargoes consigned to Werco Trade that were shipped in February and May show that the cargoes had arsenic contents of 8.79% and 8.72%, respectively.
Three Doe Run Peru concentrates consigned to Metco Suisse towards the end of the year had an arsenic content ranging between 0.52% and 0.57%.
Wermelinger refused to comment on the identity of the end-buyer of the cargoes, and Metal Bulletin has not been able to independently establish who the ultimate buyer or buyers of the cargoes are.
One company – Tianjin Machinery & Electric Equipment Import & Export Co – has been listed as the so-called notify party for several shipments of concentrates from Peru to Dalian, including at least one parcel of El Brocal concentrates sold by Werco in Peru, Chinese import data, Peruvian export records and a corroborating bill of lading also obtained by Metal Bulletin show.
Peruvian export records also show that Tianjin Machinery & Electric Equipment Import & Export Co acted as the consignee for the largest shipment of El Brocal concentrates seen this year, which was a 3,253-tonne containerised cargo shipped on October 27.
That cargo also had the highest arsenic content of any of the shipments for which assay records are available, with levels of the toxic metalloid measured at 9.14%.
Notify parties – the companies that are contacted by port authorities when shipments arrive – could be held liable for contravening customs rules if they were acting as principal or had assumed responsibility for handling the import as an agent for the end-buyers, Clyde & Co’ s Whittaker said, again speaking in general terms.
Notify parties are often freight forwarders, agents acting for the end-buyers, or the end-buyers themselves.
The precise origin of the Peruvian cargoes is not listed in the import data for Dalian, but a bill of lading and a corroborating cargo manifest also obtained by Metal Bulletin show that in recent months Tianjin Machinery & Electric Equipment has acted as the notify party for at least one shipment of El Brocal concentrates consigned to Werco Trade.
Tianjin Machinery & Electric Equipment Import & Export Co did not respond to a request for comment on whether it held title to the cargoes at the point of import, or on the identity of the end-buyer.