Is JPMorgan The Mystery Trader Cornering The World's Copper Market? And Zinc, Aluminum & Nickel?
The Cerro Verde copper mine in the Atacama desert near Arequipa, Peru.
Single Traders Hold 90% Of Total Copper & Aluminum, 50-80% Of Nickel, Zinc At LME
As commodity prices soar to new records, the ability of a few traders to hold huge swaths of the world's stockpiles is coming under scrutiny.
The latest example is in the copper market, where a single trader has reported it owns 80%-90% of the copper sitting in London Metal Exchange warehouses, equal to about half of the world's exchange-registered copper stockpile and worth about $3 billion.
Single traders also own large holdings of other metals. One trader holds as much as 90% of the exchange's aluminum stocks. In the nickel, zinc and aluminum alloy markets, single traders own between 50% and 80% of those metals, and one firm has 40%-50% of the LME's tin stockpiles.
While commodities exchanges scrutinize all holdings to ensure a single player isn't trying to corner the market, and many of the positions are owned by big firms on behalf of clients, the large holdings do result in a concentration of ownership that could skew prices.
At the same time, thousands of new investors are flooding into the commodities markets, either directly or through exchange-traded funds, seeking to take advantage of an expected rise in prices of raw materials as the global economy continues to recover.
While commodities regulators in the U.S. are considering restricting the amount of futures contracts any one trader can hold, they have no jurisdiction over physical holdings.
J.P. Morgan Chase & Co. recently had a large position in copper, though it is unclear whether the U.S. bank increased its holdings or whether a new player has taken a dominant position.
Continue reading at the WSJ...
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DB here. The mystery trader is JP Morgan, even though they sheepishly deny the story below, claiming that they don't own more than 90% but declining further comment. They launched the industry's first copper ETF just last month, for which they need to own substantial physical quantities of the metal. Here's some background.
December 4
JP Morgan revealed as trader that bought £1bn of copper on LME
The $1.5bn (£1bn) trade was described in the LME's daily update as "between 50pc and 80pc" of the 350,000 tonnes in reserves. This pushed up the price for the immediate delivery of copper to $8,700 – its highest level since the financial crisis in October 2008.
A source close to the situation said that JP Morgan had bought the copper contracts, adding that amount is closer to the "lower portion of the range" disclosed by the LME.
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Back on October 24
JPMorgan Files For Physical Copper ETF
http://www.indexuniverse.com/sections/features/8282-jpmorgan-files-for-physical-copper-etf.html
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December 14 - The day after the WSJ story
JPMorgan cuts silver short; denies 90 pct copper data
http://www.reuters.com/article/idUS1437388920101214
A spokesman for JPMorgan, asked by Reuters to comment on the market talk, said the company did not hold more than 90 percent but declined to comment further.
http://www.reuters.com/article/idUSTRE6BD3RV20101214
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And you know what they're doing with Silver...
Recent related stories...
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Jan 12, 2011 at 12:33 PM
Reader Comments (10)
source...
http://www.indexuniverse.com/sections/features/8282-jpmorgan-files-for-physical-copper-etf.html
http://www.indexuniverse.com/sections/features/8321-ishares-takes-on-jp-morgan-copper-etf.html
http://blogs.barrons.com/focusonfunds/2010/12/14/report-jp-morgan-cutting-back-big-bets-against-silver/
http://www.reuters.com/article/idUSTRE6BD3RV20101214
http://www.businessinsider.com/copper-finger-lme-jp-morgan-copper-90-percent-owner-single-trader-december-2010-12#ixzz18xI5wRwV
http://online.wsj.com/article/SB10001424052748704259704576033941846942596.html?mod=WSJ_hp_mostpop_read
Think Merrill Lynch.