Photo credit: ASA International Trading

August 2015 - The Aluminum Association, Washington, D.C., is calling on relevant authorities in China and the United States to investigate allegations that a Chinese producer and exporter has employed fraudulent borrowing practices and inappropriately moved aluminum products through a global network of related entities.

Citing a report released by Dupré Analytics, which accused China Zhongwang Holdings Ltd. of defrauding investors through its practices, the association wants authorities to determine if the allegations “are accurate and act quickly to intervene if laws are being broken.”

China Zhongwang Holdings suspended trading of its shares on the Hong Kong Stock Exchange on July 31 but the board of directors issued a statement investors that “the allegations in the [Dupré] report are groundless or untrue statements.”

The implied fraudulent behavior relevant to the North American aluminum industry “involves the import of deliberately misclassified and/or trans-shipped semi-fabricated aluminum into the North American market in order to capture and possibly inflate certain VAT tax rebates available to exported Chinese wrought products and to evade antidumping and countervailing duties on certain aluminum products of Chinese origin,” the Aluminum Association stated Aug. 5. 

If metal is deliberately misclassified to avoid relevant export duties, this creates “an unlevel playing field” for most other aluminum producers “and lead[s] to distortions in the marketplace that have ripple effects across the entire industry,” it said.

Yet, China Zhongwang Holdings and the Aluminum Association both indicated that Dupré Analytics, the firm making the claims, is short selling Zhongwang stock and stands to profit from declines in the company’s share price.