A top European copper producer recently announced a massive metals theft that has industry observers questioning the security and inventory management of the metals sector.
German company Aurubis AG on Aug. 31 reported that it was the victim of a huge metals scam. The company which is the largest copper producer in Europe said that the theft is resulting in losses of hundreds of millions of Euros. After the announcement, the company’s shares dropped by as much as 18 percent and it stated that it does not expect to meet its profit forecast for the year because of the theft, according to Bloomberg.
The massive fraud involved shipments of copper scrap metal that Aurubis uses in its metal recycling business. Aurubis purchases industrial scrap and old cables, pipes, and other items to recycle thousands of tons of scrap every day. The company said that some scrap suppliers appear to have manipulated the details about their scrap shipments and had been working with employees in the company’s sampling department to hide the shortfall and cover it up. The company explained that suppliers provide an estimate of what their materials contain and after visual inspection, Aurubis labs analyze the metal content and pay suppliers on that basis.
An Aurubis spokesperson said that in the production process, they found that metal was missing. This was not discovered right away because, for copper, it takes about four weeks to process the material. The company is undertaking a check of metal reserves to be completed by the end of September and has involved German government criminal investigators.
Inventory Oversight Questioned for Metals Sector
This Aurubis metals scam comes in the wake of another theft discovered by the company early this summer. The combination of these two events coupled with recent nickel fraud in Europe has reawakened concerns about security in shipping and warehousing in the metals sector and reveals shortcomings in oversight.
In June, Aurubis said that it uncovered a theft ring involving products containing precious metals. The company discovered that someone had stolen high-value metal-bearing intermediaries generated during the refining process. A company spokesperson said that it takes specific knowledge and access to the processing equipment to steal something like these intermediaries. While the two cases appear to be separate, both raise concerns about Aurubis security controls. The individuals involved in the theft ring are in custody and awaiting trial.
In another scandal in the global metals industry, the commodities trading company Trafigura Group said in February it was also the victim of what the company called “systemic fraud.” The company uncovered a massive nickel fraud creating a $600 million loss. Trafigura discovered that the cargoes of nickel it had bought actually did not contain any nickel. The London Metal Market this year also reported metals fraud when it discovered some bags of nickel registered in its warehouse were filled with stones instead.
Metals trading has been subject to risk and fraud in the past. A reliance on paperwork to back the shipment and storage of expensive cargo makes it an easy target for fraud. Metals theft usually increases when the prices and demand for scrap metal rise. Apart from gold and silver, the most commonly stolen metals are non-ferrous metals like copper, aluminum, brass, and bronze. Recently, however, even cast iron and steel are seeing more theft due to demand for scrap metal.
Scrap Metal Recycling Inventory Management Software Part of the Solution
A solid software inventory management system can be part of the solution for scrap metal recyclers keeping track of valuable inventory. ScrapWare Corporation, which provides software to scrap metal recyclers, includes an inventory module that allows recycling companies to have access to accurate, real-time information about what’s in stock, and at what location and cost. This allows scrap metal recyclers to make better decisions about inventory management in addition to being an important tool to detect theft and fraud.
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