Hedge Fund, LME Accused of Turning World Copper Market Inside-Out
June 5, 2007 (LPAC)--A big hedge fund that has lost big in the metals markets this year, is manipulating the global copper market and wildly driving its prices up, according to an industry source.
Red Kite Management LLP, based in London and started in 2005 by metals traders from HSBC Bank Corp., is a large hedge fund with over $1 billion in assets under management. After making profits of over 100% in the hedge fund-driven hyperinflation in metals and commodities of 2006, Red Kite lost anywhere from 30% to 50% in the first few months of 2007, according to reports in financial wire services.
But sources say that Red Kite has gotten Chile's huge copper mining combine Codelco to manipulate both reported and actual shipments of copper to China, to throw the Shanghai copper futures markets into extreme volatility and confusion. This has driven copper futures prices back up nearly to $7,500 a metric ton on the London Metals Exchange (LME).
The International Wrought Copper Association, made of up large corporate and government users of copper, accuses the LME itself of aiding the hedge funds' speculation and manipulation of the price. Inventories of copper were reported as falling in the first week of June on the LME, but also at the Shanghai Futures Exchange, despite huge reported imports of Chilean copper to Shanghai (up more than 100% in recent months, from a year earlier). "The surprise this month has been the continual drops in LME inventories and the fact that Shanghai stocks have not risen, given the level of Chinese imports in the first four months," said Nick Moore, a London-based metals analyst at ABN Amro Holding NV, to Bloomberg on June 5. These imports have been at such suddenly elevated prices, that Shanghai copper traders claim they are reselling the copper at losses of $6-700 a metric ton to domestic users.