(Bloomberg) — Europe’s top copper producer Aurobis AG has warned it could face losses of hundreds of millions of euros after being hit by a metal fraud scandal and doesn’t expect to meet its profit forecast for the year. Shares fell as much as 18 percent.
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The Hamburg-based smelting company did not yet know the extent of the damage, but Aurobis said in a statement that it had found significant differences in the metal products and materials produced in connection with recycling. A full investigation of the metal hoarding, which should be completed by the end of September, has also involved the State Bureau of Criminal Investigation.
High-value industrial metals such as nickel and copper have historically been the target of criminals and the industry has been repeatedly rocked by a series of scandals in recent years, including the shocking revelation that commodities trader Trafigura Group was the victim of commodity trading. High nickel fraud
In addition to buying raw materials from the mine, Aurubis buys large quantities of copper-bearing scrap, from new production cuttings to old cables, pipes and electronic service boards. It processes thousands of tons of these materials every day to produce pure steel.
Significant differences
During a scheduled review of the steel mills, Aurobis identified significant discrepancies in the target inventory as well as individual samples of raw materials for recycling, the German company said.
“At the moment it cannot be ruled out that the damage could be low, in the three-digit-million-euro range.”
The company previously forecast pre-tax earnings of between €450 million and €550 million for the 2022-23 financial year, which it no longer expects to achieve. Steelmaker Salzgitter AG, which owns 30% of Aurobis, suspended its profit guidance for the financial year.
Aurubis said in June that the public prosecutor’s office and police were investigating a suspected theft ring targeting precious metal-bearing intermediate products created from Aurubis’ production processes. It said at the time that several workplaces of Airbus employees and the offices of contractors at the Hamburg site were searched as part of the investigation.
The latest evidence “leads us to conclude that Aurobis has been the target of further criminal activity following the events that occurred in June,” the company said on Thursday.
The Aurobis announcement is the latest in a series of scandals that have rocked the global steel industry in recent years.
Trader Trafigura said in February it could lose nearly $600 million in what it called “systematic fraud” after it discovered that a shipment of nickel it had bought contained no nickel.
The London Metal Exchange also shocked the market this year after discovering that a few nickel bags registered with the warehouse network were instead filled with stones.
— with assistance from Jan-Patrick Barnert.
(Updates with shares.)
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