subject: Mystery speculator buys 80% of London copper [print this page] Mystery speculator buys 80% of London copper
Over the past couple of weeks, a single, anonymous investor has bought and stockpiled 80 percent of the copper on the UK market. This strategic move comes as spot copper's premium over three-month copper hit a two-year high of US$89 this week and London copper stockpiles continue to dwindle, having dropped by over a third in 2010.
This mystery investor is attempting to "corner the market"to buy and hoard most of the copper available, thus reducing available supply and raising the price of the metal, which can then be sold at a (hopefully) substantial profit.
Aside from the increase in demand caused by his hoarding, this nameless high-stakes player is also banking on forecasts that 2011 copper production will not keep pace with projected post-recession industrial demandanalysts regard copper as having the tightest supply-and-demand fundamentals of all metalsand the planned launches of three major copper-linked exchange-traded funds next year, the holdings of which will reduce available copper even more.
So far, the mystery speculator's gambit is paying off, as the price of copper continues to recover from its recent fall off its mid-November record high. But his now-dominant position could be undermined if a major copper reserve elsewhere in the world is opened up, increasing supply and lowering the price.
Also, the London Metal Exchange has rules in place to prevent a large-scale buy-up from drying up market liquidity. When a single trader holds 50-80% of the market, that trader must lend out his copper, and so this trader is presently lending out his copper at a premium of 0.5% over the spot price.
The London hoarding is the first major attempt to corner the copper market since that of the notorious Sumitomo Corporation copper trader Yasuo Hamanaka, otherwise known as "Mr. Copper", who at one time controlled 5 percent of the planet's annual copper supply. In 1996, it was revealed that Hamanaka had secretly purchased and hoarded over 1 million tons of copper in a doomed bid to keep copper prices up, ultimately incurring losses of $2.6 billion for Sumitomo and spending eight years in prison for unauthorized trading.
Today a Bloomberg report said that 10 of 14 analysts surveyed predict the price of copper will increase next week. Three forecast lower prices and one predicted the price will remain flat.
London copper traded at US$8,719.00 per ton on Dec 3. It reached a record high of $8,966 in mid-November.
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