Copper prices hit a record high again yesterday after a Chinese state-owned newspaper said the government had decided it was not responsible for a multimillion "rogue" copper trade taken out by one of its officials.
The apparent attempt by Beijing to distance itself from the deal could leave London Metal Exchange (LME) members nursing vast losses. Speculation was mounting last night that the South African-owned Standard Bank and Sempra Metals, both prominent members of the LME, are among those exposed.
China Daily confirmed that Liu Qibing, a senior figure at the State Reserve Bureau (SRB), had built a "massive short position" on the LME. But it said an official investigation had concluded the government was not responsible because he was acting on his own. "An initial investigation found that Liu alone should be blamed for the loss," the newspaper quoted an unnamed official at the SRB as saying. "As far as I know, the loss was a result of his personal actions, instead of the government."
China Daily said Mr Liu, whom it identified as the former import division chief of the SRB's National Control Centre, sold between 100,000 and 200,000 tonnes of copper, to be delivered to LME warehouses by 21 December. He is believed to have built the positions through eight brokers in London at about $3,300 (£1,900) a tonne earlier this year. With three-month copper futures in London rising to $4,185 yesterday - setting a new record for a third consecutive day - the position could translate into $200m losses.
Sempra refused to comment yesterday on market speculation that it was exposed to the trades, while Standard Bank was unavailable for comment. Barclays, which has also featured in market rumours, said its commodity department was unaware of any exposure to the deal.
William Adams, a metals analyst at basemetals.com, said: "If [China] were walking away from it, it would take the price up because someone would have to cover. But there are so many conflicting stories going around - initially they did not admit to knowing him, then said they did, and now there are different stories about how much copper is involved."
Mr Liu is reportedly at home in Shanghai. He is a veteran copper trader, in his 40s, who has made a fortune for China in recent years by buying when prices were $1,500 a tonne and selling last year when they hit $2,700.
Sources in China told the South China Morning Post yesterday Mr Liu was unlikely to be a "rogue" trader. "He has been singled out by the bureau as a scapegoat, but he was only acting according to bureau regulations and procedures," a source close to the SRB told the newspaper.
China has been selling copper to try to cool the price. It auctioned 20,000 tonnes on Wednesday and signalled it is prepared to sell up to 500,000 tonnes. Chinese manufacturers are suffering from the impact of the rise in one of the key raw materials.Reuse content