LONDON, Nov 19: Copper prices rose again to record highs above $4,200 a ton on Friday as investors gambled that China cannot ship enough metal to cover a trading position that might expose it to losses of $200 million.
Traders believe a looming December delivery deadline on contracts to supply between 150,000 and 200,000 tons of copper placed by a Chinese trader will be impossible to meet. The trader has since vanished.
The Chinese have just added to the nervousness of a market that was already nervous. This market is flying on vapour now, Angus MacMillan, metals strategist with Bache Financial said.
Copper futures traded at a new all-time high of $4,243 a ton. Prices are now up by 34 per cent since the end of last year, and extreme volatility was expected to continue.
The short positions are believed to have been placed by Liu Qibing, who was supposed to have been trading on behalf of the State Reserves Bureau.
Market players are obsessing over Liu’s whereabouts and there was some talk in the market that he would return to work next week. He is on staff at the State Regulation Centre of Supplies Reserve, which is a unit of the National Development and Reform Commission, the bureau’s administrator.
Officials for the centre and the bureau have told Reuters that any short positions were made on his own authority, adding to the uncertainty of whether the bureau will honour the obligations. If it refuses to do so, that could leave brokers facing huge losses.
Market sources said the centre might have been aware of the short positions in April this year and may have given Liu six months to settle them.
He has not contacted his business counterparts since early October.
Some metals traders have previously said their Chinese colleagues like gambling and often do not set price limits for their positions, believing they will always come right in the end.
It has not been disclosed just how much copper is at stake but the market bets could total more than twice what is held in the warehouses of the London Metal Exchange.—Reuters