The history of commodity markets is littered with fraud and risk, and the opaque trade in scrap metal is no exception. But even veterans with decades of experience say they’ve never seen anything like the scam now rocking one of the world’s top copper recyclers.
Aurubis AG revealed this week it has uncovered a large-scale fraud involving shipments of scrap metal that it uses to feed its copper smelters, with potential losses running into hundreds of millions of euros. The announcement sent the Hamburg-based company’s shares plunging, and delivered a fresh blow to confidence in the global metals industry after a string of high-profile frauds, including the nickel scam that recently ensnared trader Trafigura Group.
Those investments have helped make Aurubis a rare success story in the European metals industry, and the company posted a record profit last year even as the energy crisis hammered producers of other power-intensive metals including aluminum, zinc and steel. Aurubis had previously forecast operating earnings before taxes of €450 million to €550 million for the 2022-23 financial year, which it now no longer expects to achieve.
There are still a lot of questions outstanding about how Aurubis found itself with a shortfall in metal that it says could mean damages in the “low, three-digit-million-euro range.” The visual inspections, while they sound crude, can actually prove very effective in identifying sub-par batches of scrap before they enter the smelting system and regularly involve four or five employees, according to people familiar with the industry’s practices who asked not to be identified because they aren’t authorized to speak publicly.
The high value of the precious metals also mean that large losses could theoretically rack up more quickly, and on smaller quantities of material.
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