New Rogue Trader hits the Copper Market, gets Squeezed

Discussion in 'Commodity Futures' started by fxpeculator, Nov 14, 2005.


    Mystery over copper bets

    China's state metal-stockpiling bureau declined to comment on a report in The Wall Street Journal Asia that a government copper trader is missing after placing "big" bets on a drop in prices.

    Tuesday, November 15, 2005

    China's state metal-stockpiling bureau declined to comment on a report in The Wall Street Journal Asia that a government copper trader is missing after placing "big" bets on a drop in prices.
    Liu Qibing, who worked for the State Reserve Bureau, or SRB, built so- called short positions that require delivery of between 100,000 and 200,000 tonnes of copper by December 21, the newspaper said Monday, citing people who have worked with the trader. Bai Jing, a spokesman for the bureau in Beijing, refused to make any comment.

    The SRB may be forced to meet requirements by the London Metal Exchange to deliver the metal, the paper said. The bureau may suffer hundreds of millions of dollars in losses, the largest since Sumitomo lost about US$2.6 billion (HK$20.3 billion) in 1996, The Wall Street Journal added. Copper has risen about 30 percent this year, trading at successive records in London.

    Rumors of Chinese short positions have been "swirling for some time," said Roy Carson, a trader at Triland Metals, one of the 11 companies that trade on the floor of the LME. "It's far too murky to draw any conclusions."

    The bureau is unaware of the short positions and denied Liu is one of its employees, the paper said, citing Wang Huimin, director of its materials management center. Wang was traveling and unavailable for comment, a colleague who declined to be named said Monday.

    A short position occurs when a trader or investor borrows a security or commodity to sell it, on the expectation that the price will decline and can buy it back later at a cheaper price.

    "If Liu's short position is on the order of 150,000 tonnes, it is rather sizeable indeed given that as of Friday there were only approximately 65,000 tonnes of copper on LME inventory," Dennis Gartman, a commodities trader and editor of the Suffolk, Virginia-based Gartman Letter, wrote in a note Monday. "This is, by historic standards, a low level of inventory on the LME. Liu is short several times that sum."

    Copper for three-month delivery on the LME rose as much as US$35 a tonne, or 0.9 percent, to an intraday record US$4,140 a tonne. It was down US$20, or 0.5 percent, in London morning trade. On the Shanghai Futures Exchange, the most-active copper contract, January, closed at 37,530 yuan (HK$36,002.53) a tonne Monday, up 440 yuan from Friday's close.

    Combined trading volume fell to 62,956 lots, from 68,146 lots Friday.

    Spot prices rose 440 yuan from Friday, to 39,230-39,400 yuan.

    China's State Reserve Bureau said last week it will sell 20,000 tonnes of copper on November 16. The state-run agency has more than 1.3 million tonnes of inventory and will accelerate sales if prices continue to rise.

    "The general reaction to the statement has been that if the normally tight- lipped SRB is so desperately trying to talk the copper market down it must have large short positions to fill," Macquarie Bank analyst Adam Rowley said.

    Traders expect "the SRB to be a buyer rather than a seller over the next two to three years." BLOOMBERG
  2. Don't these firms have risk controls. One guy shorts 200,000 tons of copper and no one notices. Classic, I love trading.
  3. LMAO, waiting for the Rogue Trader 2 movie, especially with the "Missing" headline on the trader.
  4. maxpi


    Nick Leeson went missing at one point. I probably would too.:D
  5. mhashe


    He probably suffered from Trader Dementia after adding onto a huge position that went against him.

    His buddies forgot to quote him on what he said before he went missing........."You market no show no love for me, I teach you big resson, I short you big time, hahahah".:D
  6. I'd love to see many more government-run trading firms taking big positions. Inefficiencies are a trader's lifeblood, and what could be more inefficient than government?

  7. You think you have it bad at the end of a losing trading day, this guy ends up dead (or whatever missing means in Chinese)
  8. the chinese gov't will try to teach him scalping..literally
  9. LMAO, I believe the "taking the bus" or suicide long trade is looking attractive to "Liu"
  10. Wasnt the story on this one that the SRB was already trying to talk the price of copper down when it revealed that it has 1.2 million tons of copper in reserve? Normally governments are extremely tight lipped about their copper reserves.

    The short position, if there is one, was possibly due to the SRB trying to take advantage of the fact that by revealing they had 1.2 million tons of copper (which is by any measure an enormous amount) on reserve they expected the market to fall.

    Unfortunately for SRB, the market either didnt believe they had that much, or else second guessed what they were trying to do. As a result, price went up instead!
    #10     Nov 15, 2005