China to auction off tons of copper to curb rising prices?

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A Chinese copper futures trader has racked up a loss of several million dollars for building up a massive short position on copper, but officials denied his ties with the government, sources said yesterday. "As far as I know, the loss was a result of his personal actions, instead of the government," an official with the Reserve Bureau told China Daily. In the futures trade market, a short position happens when a trader borrows a commodity to sell it, believing the price will drop and therefore can buy it back later at a lower price. The official said the copper trader Liu Qibing was the former import division chief of the National Control Centre for the Reserve Bureau, a company-like trade organization affiliated to the National Development and Reform Commission (NDRC). "A foreign media report that Liu is working with our bureau is fabricated," said the official, whose bureau is in charge of the country's strategic commodity reserves, which is a governmental organ under NDRC. The centre and Liu's division could not be reached for comment on the loss, caused by a short position of between 100,000 and 200,000 tons of copper, which would have to be delivered to the London Metal Exchange (LME) warehouses by December 21. Initial investigation found that Liu alone should be blamed for the loss, said the official. Liu is reportedly "on leave" after building up a massive short position even as copper prices hit new record highs. The official said the commission has been involved with the investigation, which his bureau and the centre took part in. The Financial Times reported that copper prices reached record highs on Tuesday as the LME tried to calm speculation that China may be forced to buy large quantities of the metal in order to cover a short position. The benchmark price for three-month LME copper hit US$4,175 per ton, up US$49 from the previous close. The metal's price has now risen by more than US$600 since the middle of September. The Financial Times quoted the LME as saying: "We are charged with running an orderly market and we are satisfied that the market is running in an orderly and appropriate manner." China is planning to auction off 20,000 tons of copper to demonstrate that it has some of the metal. The government also said last week that it had 1.3 million tons of copper, and it has taken measures to curb rising copper prices.