GOLDMAN Sachs Group Inc.’s metals warehousing unit is exploring its first foray into China, and privately held C Steinweg has expanded capacity in the country, sources said, as a financing scandal in a major Chinese port fuels a scramble for market share.

    The alleged scam, in which a Chinese trading firm in Qingdao is suspected by local authorities of fraudulently using a single cargo of metal as collateral for multiple loans, has shaken the confidence of banks and merchants in Western metals storage firms that rely on local agents to oversee warehouse operations.

    It has intensified a battle between new entrants and entrenched rivals in the multi-billion dollar business of securely storing the world’s commodities in China.

    As Goldman ponders a possible move into China, Western warehousing companies already operating in the country, including Glencore Plc. unit Pacorini Metals and Trafigura-owned Impala, are scrambling to defend their turf.

    They are looking at ditching local agents in favor of setting up their own domestic operations to oversee warehousing assets directly, said sources who work for warehousing firms or use them to store their metals.

    Detroit-based Metro International Trade Services, a major warehousing firm that Goldman bought in 2010, is looking at setting up shop in Shanghai and other bonded locations in China. (SD-Agencies)