China stands to lose at least US$100 million on the London Metal Exchange after a bet by a state commodities trader went spectacularly wrong, a press report said yesterday.
Citing a source close to China's State Reserve Bureau (SRB), the South China Morning Post reported that SRB copper futures trader Liu Qibin (劉啟斌) took short positions equal to about 130,000 metric tonnes of copper in July and August.
At the time, Liu paid about US$3,300 a tonne, expecting the price of copper to decline. Copper prices for delivery in three months' time are now about US$4,119 a tonne, the paper said.
"Liu disappeared from the market in early October and that week the bureau recovered about 50,000 tonnes of short positions on the London Metal Exchange, which pushed prices up to about US$3,800 a tonne," the source said.
"He has been singled out by the bureau as a scapegoat, but he was only acting according to bureau regulations and procedures," the source said.
But another source down-played the Chinese government's liability.
"If brokers have papers that are signed by Liu, the bureau won't obligate the positions because the bureau did not sign them," a senior official for a state-owned metal group said.
He said brokers needed to hold an authorization letter from the bureau certifying that Liu represented the bureau to open short positions on the exchange.
"If they have that, they can go to ask the government for money," he said.
Industry officials and analysts said the center might seek to share the financial pain of the unauthorized positions Liu might have taken with the brokers in a bid to settle the dispute.
Copper prices have soared this year, rising more than 30 percent, and on Monday they hit a record high of US$4,132 per tonne.
Other reports say Liu may have acquired positions of up to 600,000 tonnes of copper and losses could be much higher when contracts expire on Dec. 21.
"The market's got the bit between its teeth now and what the Chinese will be realizing is that London likes nothing better than kicking someone when they're down," the report quoted Alastair Clayton, executive chairman of London-listed copper developer South China Resources as saying.
Liu has also invited comparisons with Yasuo Hamanaka, a Japanese trader who lost US$2.6 billion for Sumitomo Corp in 1996, and China's Singapore-listed China Aviation Oil, which recently went under after losing US$550 million through derivatives trades that turned sour.
The newspaper said that Liu, who is in his 40s and who has been a metals trader for more than 10 years, is on a leave of absence from the bureau.
He is believed to be at his residence in Shanghai.
China, a huge consumer of copper, has in recent weeks tried to cool the price by drawing down some of its stocks.
In theory this should have made the price fall, and Liu was apparently banking on this happening by taking out what are known as short positions -- selling copper he did not have in the hope of buying back his underlying commitments more cheaply in the future.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS