Copper sentiment..
News Alert from Reuters via Quote.com
Topic: (NYSE:AR) Asarco Inc,
Quote.com News Item #5910020
Headline: FOCUS-Hamanaka punished, Sumitomo ripples spread
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By Martin Hayes
LONDON, March 26 (Reuters) - Justice caught up with rogue
copper trader Yasuo Hamanaka on Thursday when he was sentenced
to eight years imprisonment for fraud and forgery, but the
implications of the $2.6 billion Sumitomo Corp (TOKYO:8053) scandal
will rumble on.
The end of the year-long Tokyo trial drew a line under one
strand that of the crisis that exploded in June 1996, but left a
raft of unanswered questions and further investigations in the
U.S. and Britain.
"Eighteen months have gone by and we are none the wiser how
all this happened," one analyst said.
- HOW WAS THE MONEY LOST?
During 10 years of alleged unauthorised trading, Hamanaka
racked up losses of $2.6 billion, apparently without the
Japanese brokerage knowing.
The deals were carried out through a complex web of business
on the London Metal Exchange (LME), options transactions,
off-market trades, which were all linked to control of warehouse
inventories.
But the methodology and whether Hamanaka operated alone, or
in tandem with others, remains unclear.
"This was a closed case...really we don't know anything," a
senior trader said.
Some said that Hamanaka's sentence, which was at the lower
end of an informal seven-10 year market that traders had
forecast, suggested that the disgraced dealer had kept his
silence for a lower prison term.
"I am certain that people in Sumitomo knew what was going
on...maybe not from 1998 to 1994, but towards the end when he
became desperate," another senior trader said.
Others noted that Sumitomo was seeking to recover its
massive losses and still pursuing Hamanaka.
"He may not be able to say what happened, with Sumitomo
still taking action," the first trader said.
"It (the trial) was just a sideshow...you are looking at
someone who is carrying the can," the analyst said.
- METAL EXCHANGE TOUGHENS UP, ROGUES BEWARE
One consequence of Hamanaka's 10-year spree is a more
vigilant and tougher regulatory environment on the LME - the
world's largest non-ferrous metals market.
"The LME was closely involved from the outset in uncovering
Hamanaka's fraudulent activities...This was rogue trading on the
most extravagant scale," LME Chief Executive David King said in
a statement.
The LME has done a great deal in the last 18 months to add
to protection from rogue trading, he added.
""It has developed rapidly much more comprehensive market
information and analysis. It wishes to go further by extending
its reach into over-the-counter trading," King added.
"It is tougher now, but it gives our members and users more
confidence in the system," the analyst said.
But some said increased regulation and more compliance could
be costly and impair the ability of firms to carry out trade
business.
"It is a changed market now, and it is more onerous how you
do business. Let's hope they don't overdo it," the senior trader
said.
"People who are not here now have abused the system - the
people who are left have to live with it," he said.
- HAMANAKA'S LEGACY TO THE COPPER INDUSTRY
The wider copper market is a much-changed place now,
compared to the late 1980s and early 1990s, when Sumitomo's
influence was at its height.
Prices have fallen from around
$2,600/tonne just before Hamanaka's denouement to current levels
of $1,755, or a 33 percent depreciation.
Many high-priced mines and smelters projects have had to
close, but, equally, a slew of low-cost operations which were
financed when prices were high will spew out copper right
through into the millenium, some analysts said.
But others said that Hamanaka and Sumitomo's activities were
not the be-all and end-all of the market.
"Mr Hamanaka's influence has been vastly over-rated...he
controlled the market to a lesser degree than he has been
credited with," Richard de J. Osborne, President and Chief
Executive of major North American producer ASARCO Inc (NYSE:AR)
commented after a presentation here Thursday.
- WILL IT HAPPEN AGAIN?
Despite the increased measures taken by the LME, and closer
co-operation that has been put in place between national
regulators, there is no guarantee that other rogues will not
emerge.
"Somebody will always try to take advantage, but hopefully
the various regulations and initiatives that the LME has put in
place will catch future manipulation," the analyst said.
london.commodities.desk@reuters.com))
Copyright 1998, Reuters News Service |
