Aurubis, Europe’s leading copper producer, has issued a warning of potential losses in the hundreds of millions of euros after falling victim to a massive scam involving shipments of scrap metal utilized in its recycling operations. This revelation caused shares in the company to plummet by as much as 18%. Aurubis suspects that certain suppliers manipulated information regarding the scrap metal they supplied and colluded with employees in the company’s sampling department to conceal the discrepancies.
This incident has raised concerns about Aurubis’ security controls, particularly in light of the company’s announcement in June about uncovering a theft ring targeting products containing precious metals. Notably, the two incidents seem to be unrelated.
The scam specifically pertains to materials procured for Aurubis’ metal-recycling business. In addition to raw materials from mines, the company acquires significant quantities of copper-bearing scrap, ranging from nearly new manufacturing offcuts to old cables, pipes, and electronic circuit boards. Every day, Aurubis processes thousands of tons of these materials to produce refined metal.
According to Angela Seidler, Vice President for Investor Relations and Corporate Communications at Aurubis, the company’s recycling suppliers seemingly manipulated information about the raw materials delivered to them and collaborated with employees in the sampling department to conceal the discrepancies. Suppliers provided estimates of the material’s content, and after a visual inspection, Aurubis’ laboratories analyzed the metal content and paid the firms based on these assessments. However, discrepancies were discovered during the production process over time. For example, in the case of copper, it takes approximately four weeks for the material to be processed.
Aurubis is currently conducting a comprehensive check of its metal reserves, which is expected to be completed by the end of September. The investigation also involves Germany’s state office of criminal investigation.
Previously, Aurubis had projected operating earnings before taxes for the 2022-23 financial year in the range of €450 million to €550 million. However, the company no longer anticipates achieving these projections and has warned of potential losses in the “low, three-digit-million-euro range.” Steelmaker Salzgitter, which holds a 30% stake in Aurubis, has also suspended its results guidance for the financial year.
While this incident is indeed serious, Aurubis believes that its impact will be absorbed within the current fiscal year and will not affect the company’s expansion plans and strategic priorities.
In June, Aurubis had previously reported that the public prosecutor’s office and the police were investigating a suspected theft ring. Searches were conducted at several Aurubis employee workspaces and on-site offices of contractors at the Hamburg site as part of the investigation. This incident appears to be separate from the recent scam, though it is still too early to determine if the two cases are interconnected.
The metals industry has witnessed several scandals in recent years, including Trafigura Group’s revelation in February that it expected substantial losses due to an alleged systematic fraud involving nickel cargoes. Additionally, the London Metal Exchange shocked the market this year after discovering that some bags of nickel registered in its warehousing network contained stones rather than the expected metal.
