Trader stiffs China on copper deals By Claudia Carpenter November 16, 2005
Copper prices rose to a record for the third session in a row amid speculation China, the world's biggest buyer, may have to purchase metal to cover losing bets by a trader at a government agency.
China's State Reserve Bureau has to find 100,000 to 200,000 tons by December 21 for expiring copper contracts on the London Metal Exchange, The Wall Street Journal said, citing unnamed traders. A missing trader, Liu Qibing, worked for the bureau and bet prices would fall, the article said. Copper prices have climbed 32 per cent this year.
"Prices may go substantially higher as the Chinese have to scramble to find copper to deliver," said Daniel Vaught, an analyst at AG Edwards & Sons in St. Louis. "This is a big deal if you can get the Chinese on the hook."
Copper futures for December delivery rose US0.8c to $US1.9135 a pound on the Comex division of the New York Mercantile Exchange, the highest close ever. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Mr Liu was missing from the job for "weeks", The Wall Street Journal said.
"All of this is probably in the market and it's not a big deal," said Marc Kaplan, president of Mews Metals Trading LLC in Verona, New Jersey. China last week said it would auction 20,000 tonnes from its reserves on November 16.
"China is notorious for making its own rules in the commodity markets" and may decide not to make the deliveries, Vaught said. A default was "not outside the realm of possibilities", he said.
There isn't enough metal in warehouses approved by futures exchanges to cover contracts for 200,000 tonnes. There are 65,000 tonnes tracked by the London Metal Exchange, 73,434 tonnes by the Shanghai Futures Exchange and 3,690 short tons (about 3,295 tonnes) by Comex.
On the London Metal Exchange, copper for delivery in three months rose $US21, or 0.5 per cent, to $US4,126 a tonne ($US1.8715 a pound). Prices earlier reached a record $US4140.
Prices on the Shanghai Futures Exchange rose 1.2 per cent. Source:Bloomberg, AAP
AVM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
