The port city in northeastern China is famous for its Tsingtao brewery that was founded more than a century ago with 400,000 Mexican silver dollars as capital. But in recent years, Qingdao – the beer’s name uses an older spelling – has been attracting other types of metal. As Chinese traders’ appetite for cheap forex funding has increased, piles of copper and aluminium used as loan collateral have accumulated in dockside warehouses.

But at the end of May, Qingdao’s metal stacks started to wobble. Local authorities began investigating whether a Chinese company had pledged the same lots of material to several banks – the equivalent of a homeowner taking out multiple loans for a house while telling each lender they were the only one. With potential losses running into hundreds of millions of dollars, banks and traders scrambled to assess their positions. Standard Bank and Standard Chartered Bank said they were investigating their exposure, while China’s CITIC Resources, asked courts in Qingdao to secure its metal held at Qingdao Port.

“Everybody has been going through their receipts with magnifying glasses and heading to warehouses to look for their metal,” says Vivienne Lloyd, an analyst at Macquarie.