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17 April 2019

It doesn't always contain what it says on the tin



Things aren’t always what they seem, and the mining and metals business offers lots of scope for dubious - and even nefarious - activities. There were the (possibly?) apocryphal stories of attempts to blow up the Benguela Railway to cut copper shipments in order to create tightness in the market, to the benefit of, presumably, somebody’s long position. There was the Bre-X scam, featuring salted “gold” mines, and the Poseidon nickel game in the late 1960s; incidentally, I remember as a schoolboy hearing a cousin of my mother waxing lyrical about how much he was making on his Poseidon shares - how he ended up when it crashed, though, I honestly can’t remember.

One bizarre exposure of a scam started one day when a very good friend rang and said he had - apparently - caused a section of the Rotterdam port area to be closed. His drums of nickel, he said, were leaking phosgene gas and the warehouse they were in and its surroundings had been declared dangerous while the incident was investigated. Apparently, the drums had not been properly sealed and water had got in to them, starting a chemical reaction with whatever was inside. Now, I’m not a chemist - and neither is he - but it was pretty obvious that it wasn’t nickel. After all, water (rain or sea: it wasn’t clear which) doesn’t react with nickel cathodes to produce phosgene. So what was it that the seller had mixed in with the nickel? I don’t think they ever really found out, but it was a sharp reminder that at the time - early 1990s - what the documentation said was in a shipment wasn’t necessarily what actually came out of Russia.

There was another chemical related event, as well. A phone call one day from Merseyside Police, saying that they were interested in a consignment of lead ingots currently on a vessel, heading for a warehouse. Don’t do anything unusual, they said, but we want to keep that parcel under surveillance. Don’t worry, you haven’t done anything wrong, we’re just informing you.

Intriguing. What’s the chemical connection? Well, the shipment of lead was from Peru, and it subsequently turned out that the ingots had been hollowed out and refilled. What with? Peruvian Marching Powder, of course. Would have been something of a surprise to the recipient if it had been delivered to a regular lead consumer. Whether it was a one-off or part of a sequence of shipments I don’t know, but the police got their men this time.

And then, lastly, there was the story of the nickel that was rather like the well-known cases of sardines - for trading, not for using. That involved a lot of other big names as well, with nickel in a Japanese warehouse being traded round and round, mainly as a financing operation, I guess. All went well, until one day one of the traders decided they wanted to sell it to a consumer, who might actually need to open the drums and use the contents. Bad mistake. It wasn’t primary nickel in there; it was all sorts of old rubbish. That court case dragged on for a long time, and cost several major players serious money.


And now away from metals, I noticed in the newspaper this morning that former Prime Minister David Cameron apparently has a new job. The Japanese are seemingly due to have referendum on something next year, and he has been hired to advise them on how to do it. Truly, we must be approaching the end of days………..  

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