China Metals Market Rocked by $144M Disappearance

New Delhi, February 2, 2026: China’s metals trading sector is reeling after a high-profile dealer, known in the industry as “The Hat,” reportedly fled the country, leaving behind a trail of unfinished contracts and financial losses exceeding 1 billion yuan ($144 million).

The disappearance of Xu Maohua, the man behind the nickname, has sent shockwaves through the industry and put state-backed entities under intense regulatory scrutiny.

A Broken Chain of Trust

Xu Maohua was a well-known middleman who facilitated complex trading networks involving private firms and state-owned enterprises (SOEs). According to industry insiders, “The Hat” acted as a central link in a massive payment chain for copper and other base metals.

When Xu vanished, that chain snapped. He reportedly owed vast sums to several major players, who in turn became unable to pay their own suppliers. The highest-profile victim identified so far is SDIC Commodities, a unit of the state-backed giant State Development & Investment Corp.

Lawsuits and Frozen Assets

The fallout has quickly moved from the trading floor to the courtroom. Recent exchange filings reveal:

• Guangdong Prolto Supply Chain Management has filed a lawsuit against SDIC Commodities for 219 million yuan in unpaid bills.
• Other private firms are scrambling to recover funds through similar legal actions.
• In an effort to prevent further loss, a court in Tianjin has frozen 3,150 tons of refined copper stored in Wuxi. The metal remains locked in warehouses as banks and traders fight over who truly owns the collateral.

The Crackdown on “Circular Trading”

This scandal has reignited concerns from Beijing regarding “circular trading.” This controversial practice involves companies buying and selling the same batch of metal multiple times to create the illusion of high revenue and volume. While it helps firms meet state-mandated growth targets, it often hides a lack of actual physical demand and leaves the system vulnerable to a single point of failure—like a dealer disappearing.

Regulators have warned state-owned firms for years to stick to their “core business” and avoid these risky, opaque financing games. The disappearance of Xu Maohua is being seen as a “Minsky moment” for the local metals market, where years of hidden risks are finally surfacing.

What’s Next?

As authorities attempt to trace Xu’s whereabouts and recover assets, the incident is likely to trigger a massive tightening of credit in the Chinese commodities space. Smaller private traders may find it harder to secure financing as banks grow wary of who is actually standing behind the deals.