London - China is being forced to disclose its holdings of copper for the first time, as the nation seeks to limit losses from a trader's wrong-way bet on a drop in prices.
The State Reserve Bureau (SRB), the country's metal stockpiling agency, said on its website on November 9 it would sell 20 000 tons of copper. A week later, it announced another sale of the same amount.
The statements, unprecedented for the SRB, failed to dampen speculation that China could not meet its copper commitments, and prices climbed to records in London and New York last week.
The SRB might have to deliver as much as 200 000 tons of copper because of positions amassed by trader Liu Qibing, the state-run China Daily said on Thursday. That is about 60 000 tons more than has been reported worldwide.
"They used to be low key, and now they have suddenly become high profile," Li Yusheng, the head of the copper department at Beijing Antaike Information Development Company, a government research affiliate in Beijing, said last week. "It has become a government issue."
By announcing sales, China may be seeking to ease investor concern about inventories and drive down prices to limit losses from Liu's trades, analysts said.
The SRB had 1.3 million tons of stockpiled copper, Reuters cited an official from the bureau as saying on November 11, which was about 1 million tons more than most estimates.
"We take the 1.3 million tons stock figure very seriously now that the political hierarchy of the Chinese government is involved," said Maqsood Ahmed, an analyst at Calyon Global Trading.
Liu had been under house arrest since mid-October, the Economic Observer, a provincial government newspaper, said yesterday. Liu entered into contracts pledging to deliver copper at a later date at a set price. His bet was that prices would fall and he would be able to buy the metal cheaper than he would have to deliver it for. But copper has gained 34 percent this year.
- Bloomberg