The metals 38% rally in the past 12 months has echoes of the Sumitomo scandal, when trader Yasuo Hamanaka hoarded metal, sending copper up 69% in a year, said Mr Threlkeld, president, Resolved Inc. Copper rose to a record $4,174 a metric tonne on the London Metal Exchange.
This time, the rally may be linked to the actions of Mr Liu Qibing, a trader for Chinas State Reserve Bureau, said Mr Threlkeld, the most accurate forecaster in Bloombergs annual copper-market survey. Mr Liu may have sold 100,000 to 200,000 tonnes of copper the government didnt own, amassing a so-called short position in a bet prices would fall, the Wall Street Journal reported Nov 14.
One can assume there will be a spike higher up to $4,500 a tonne as China or another buyer seeks to replace up to 200,000 tonnes of the metal sold short by Liu, said Mr Threlkeld in a telephone interview yesterday from Scottsdale, Arizona. Once the metal is bought, the market is going to collapse overnight by $1,000 or $1,500 a tonne, he added.
Prices have doubled in the past two years as demand exceeded production from the worlds mines and scrap yards, forcing manufacturers to dig deeper into inventories. London Metal Exchange inventories reached a 31-year low in July.
Consumption has grown along with the economy in China, the worlds largest user, leaving a global supply deficit of 235,000 tonnes in January through July, according to the Lisbon-based International Copper Study Group. The deficit remained even as demand dropped 8.6% in the US, 6.9% in Japan and 5% in Germany, the worlds next-biggest users.