Beijing, June 25 - Chinese authorities have impounded palm oil stocks in a northern city after a major trading company's boss vanished, leaving a question mark over at least a hundred million yuan in prepayments from clients, traders said on Wednesday.
Clients of the Zhejiang X & K Import and Export Co. Ltd in the port city of Tianjin, also known as Xiekai, said the firm's general manager Wang Wei has been out of contact since last week.
Courts sealed about 70,000 tonnes of palmoil held in tanks in Tianjin, as well as some in tanks in the southern port of Guangzhou and at least one cargo that had yet to unload, traders said.
"At least one cargo of about 20,000 tonnes was sealed in Tianjin last week after the boss was nowhere to be found," said one trader in Beijing who does business with the company.
Calls to the company went unanswered on Wednesday. Police and port officials in Tianjin declined to comment, while court officials were not immediately available for comment.
"Many of Xiekai's clients had paid in advance. Not so many trading companies in the country can ensure long-term supplies, but this company did," said a trading manager with Zhejiang Shining Gold Foodstuffs Co. Ltd, who said his company was unable to access its prepaid cargo after it was impounded in Guangzhou.
Wang had collected more than 100 million yuan ($14.56 million) in pre-payments for palm oil, estimated traders.
Xiekai offered cargoes into China at discount prices, tempting many of its customers to pay in advance, traders said.
"It collected full payment for cargoes at below-market prices before the ships arrived," said one executive at a competitor in Tianjin, which is also a leading palmoil trading firm.
"Some of its clients could face heavy losses."
Chinese companies have imported around 500,000 tonnes of palm oil each month from Malaysia and Indonesia in 2008, after domestic edible oil prices hit a record high in March.
But prices have dropped sharply since then, leaving many of the booked cargoes unprofitable.
Xiekai was set up in 2003 and traded products including plastics, textiles, machinery and chemicals, the firm says on its website http://www.xkchina.com/. Its trading turnover reached 400 million yuan in 2005, the last year for which information is available.
Trade in edible oils into China boomed after Beijing lifted import controls in 2006. China is the world's largest palmoil importer, buying more than 5 million tonnes last year.
Xiekai imported more than 400,000 tonnes of palmoil a year, said the Shining Gold Foodstuffs trading manager.
But its suppliers have cut off delivery since the problems emerged, compounding the difficulty faced by Xiekai's clients, he added.