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Rising copper prices may exacerbate China's losses

London Metal Exchange (LME) chief Simon Heale said yesterday the LME was monitoring market positions as usual and had not held any talks with Beijing over the impact of potential losses in copper futures incurred by a Chinese trader.

"We are talking to brokers but is it different from what we normally do? ... No," Heale told reporters on the sidelines of a copper conference in Shanghai.

Copper prices struck an all time high last week when markets seized on reports that Liu Qibing (劉啟斌), a trader working on behalf of China's State Reserve Bureau (SRB), had built huge short positions on copper.

Liu has since gone missing amid further reports he is under house arrest while Chinese authorities have claimed the trader was conducting trades at his own behest and not on behalf of the SRB.

Traders claim that Liu's position ranged anywhere between 100,000 and 600,000 tonnes of the metal, and with the contracts not due to expire until Dec. 21 losses are expected to be at least US$100 million.

However, this could rise dramatically if copper, which recently hit US$4,000 per tonne, continues to rise before the contracts expire.

China and the SRB have apparently been attempting to cool the price of copper ahead of the contract expiries through unprecedented auctions of the metal and claims it has 1.3 million tonnes of copper stockpiled.

That claim is well above market expectations.

"We would have no reason to talk to [the Chinese]," said Heale, adding that he did not believe that potential trades conducted between China and brokerages on the LME had been illegal.

Heale also declined to confirm if China was behind short positions that have helped push copper prices to record highs.

"It is not appropriate for the LME at any time to comment on who is using the market," Heale said.

The SRB was established in the 1950s to ensure a stable supply of commodities on the mainland for economic development. It is not subject to the usual checks and balance of China's financial regulatory bodies.
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