At London Metal Exchange, Mystery Buyer Holds Bulk of Copper

A mystery buyer is apparently holding more than half of the copper stocks at the London Metal Exchange's warehouses, the latest revelation of how a single trader can roil an entire commodities market.

That trader, whom the exchange hasn't identified, owns between 50% and 80% of the 355,750 metric tons held in LME-listed warehouses. This amounts to more than 177,875 metric tons of copper, valued at about $1.5 billion. The exchange first disclosed the large position on Nov. 23 in its daily inventory holder report.

View Full Image

"It's an awful lot of copper; it's an awful lot to finance," said Charles Swindon, managing director of RJH Trading Ltd., a London metals trading house. The trader's holding accounts for about 1% of all the copper the world will consume this year.

It is unclear when the trader started building the position, but market participants have noted some odd market trends that might be linked to the buying. Speculation on the identity of the trader runs from some soon-to-launch exchange-traded funds to an options trader obligated to deliver a large amount of metal.

Globally, copper stocks held by all commodity exchanges rose 14% from the end of October to about 620,000 metric tons, though the LME's supplies have declined this year. Most of the LME copper stocks are in the U.S., with New Orleans holding 126,950 tons of copper and St. Louis having 95,825 tons, according to the exchange.It is unusual in the copper market for one trader to hold such a big supply in exchange warehouses around the world. Copper producers and consumers typically trade the metal through bilateral contracts, leaving the exchange-listed metal the "last resort" for those who want to fill orders tied to futures contracts.