Copper hits new record high, eyes China
Tue Nov 15, 2005 6:51 PM GMT
By Nick Trevethan
LONDON (Reuters) - World copper prices traded at new record highs in London on Tuesday, with the focus on reports of a big short position, possibly held by China, that might have a major impact on market direction.
London Metal Exchange (LME) copper for delivery in three months traded at $4,160 a tonne in late floor trading, extending its surge so far this year beyond 30 percent.
Analysts said the market had been boosted by players hoping to cash in on a resolution to a possible short position -- effectively a bet the market will fall -- that industry talk put at potentially 150,000-200,000 tonnes.
"If the market has been squeezed, that weakens the bullish fundamentals argument," BaseMetals.com analyst Will Adams said, suggesting current prices were precariously high.
Dealers were worried that a trader for China's State Reserves Bureau (SRB) might have taken the short position on the LME without official sanction.
A senior SRB official said it had no evidence of such a position but it might be the trader's own if it did exist.
The trader, Liu Qibing, headed up physical and futures trading for the SRB, but he has not been heard from for a few weeks after talk surfaced of a large short position held by his employer on the LME.
London dealers say the short position might be more than twice the size of copper stocks held in warehouses of the LME, the world's biggest non-ferrous metals exchange. Exchange officials were unable to comment.
"Traders had speculated that the SRB intended to deliver physical copper to close out these short trades," Numis Securities analyst John Meyer said in a note.
"...it would now appear difficult to deliver sufficient tonnages of copper into LME warehouses by mid-December," he added.
China, which consumes about 20 percent of the world's copper, had been trying to cool prices with highly publicised deliveries and sales of metal to its domestic market.
The SRB is to auction 20,000 tonnes of copper on Wednesday, but dealers said it would have little effect on prices as a sale would be equivalent to less than a week's domestic consumption in China.
COMEX copper prices surged on Monday on the SRB's comments in anticipation of a possible short squeeze when and if the rumoured positions became due in December. |
