BREAKING NEWS - JP MORGAN BUYS OVER HALF OF LME COPPER $1.5B

[AGgressive Metal]

FROM ZERO HEDGE:

JPM Corners Copper Market, LME Says Not To Worry, All Is Good
Submitted by Tyler Durden on 12/04/2010 14:23 -0500

Not content with holding the biggest paper short position in silver, JP Morgan is now intent on cornering the copper market, as the monopolist firm stretches its FRBNY-facilitated muscles in an attempt to stem the massive losses incurred via its silver short. As the Telegraph reports, following up on a story of a "rogue" purchaser who bought up $1.5 billion in copper on the LME, "the American investment bank JP Morgan is the mystery trader that grabbed more than half the copper on the London Metal Exchange." This is a huge copper purchase, and represents between 50% and 80% of the 350,000 tonnes in reserves, confirming that JPM is now the dominant manipulator in yet another commodity market. The purchase also pushed the price for immediate delivery to $8,700, the highest since October 2008. It is unclear how China, which is the biggest non-speculative end user, will react to this development, nor whether the CFTC will (ever) take any action against such blatant market manipulation. One thing is certain: the LME will do absolutely nothing: "Diarmuid O'Hegarty, head of compliance, said: "The LME has noted recent comments about the current circumstances in the copper market. Such circumstances are not unusual and the exchange is exercising its well established procedures for maintaining an orderly market." He added that large trades were not a cause for concern because the market's rules dictate that holders have to lend out a proportion of their stock to ensure a smooth supply of the metal." And who would possibly assume that JPM may not follow the rules...

As to the reason why JPM is manipulating this latest market: simple -ETF frontrunning:

Traders said JP Morgan's name had been circulating the market all day as the most likely buyer, especially since it is about to launch a physically-backed "exchange-traded fund" (ETF) in copper imminently.

One metals broker dealing on the LME said: "The story is that they're positioning themselves in front of the ETF. There's been a lot of speculation it's them."

Traders noted that there was no physical shortage of copper in the markets but that fears of a squeeze have persisted ever since a raft of investment banks announced their intention to launch ETFs this autumn.

Last month metal traders wrote to the Financial Services Authority (FSA) claiming that licensing the funds, which are also likely to be launched by BlackRock, Goldman Sachs and Deutsche Bank, may amount to "approving the next financial bubble".

It is estimated that if the copper funds are fully subscribed they would be looking to buy more than half the total stocks in LME warehouses.

Traders' concerns are based on the ETF model that will require the investments to be backed by physical metals, such as copper, lead, aluminium and nickel, rather than paper assets offered by futures contracts.

Daniel Major, a metals analyst at RBS, said: "There isn't a huge buffer available for the market. The supply situation can quite easily tighten in copper."

It's all good, though: the LME is on top of it: "The LME moved to quash claims that a rogue speculator was attempting to corner the copper market." See, it's not rogue. It's just JPM. Ergo all is good.

As for the CFTC, we now know why they are so intent on delaying the size limit discussion: after all, any regulation will be forward looking - better let JPM accumulate all commodities it can and distribute these via hidden channels to affiliated subs before the ever so busy Gary Gensler corrupt cronies decide to raise their finger on what is increasingly an ever more blatant market manipulation scheme. At least in this case, JPM will push the price higher unlike what it is doing courtesy of its gold and silver manipulation. However, the PM market (especially Asian accounts) will soon make sure Blythe Masters is looking for a job within 3 months as we predicted a few weeks ago.

[HPMBTT]

My my....better keep stacking your copper (pennies, bullion)!

[AGgressive Metal]

The London Telegraph story :

http://www.telegraph.co.uk/finance/newsbysector/industry/8180304/JP-Morgan-revealed-as-mystery-trader-that-bought-1bn-worth-of-copper-on-LME.html

Industry
JP Morgan revealed as mystery trader that bought £1bn-worth of copper on LME
The American investment bank JP Morgan is the mystery trader that grabbed more than half the copper on the London Metal Exchange, The Daily Telegraph has learned.
Copper Wire Spools
The trade was described in the LME's daily update as 'between 50pc and 80pc' of the 350,000 tonnes of copper in reserves
By Louise Armitstead and Rowena Mason 8:30AM GMT 04 Dec 2010


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 high premium on the spot copper price normally reflects fear of a shortage of the metal, which is in hot demand across the world as a vital component in a mass of products from electrical gadgets to wiring.

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.

Traders said JP Morgan's name had been circulating the market all day as the most likely buyer, especially since it is about to launch a physically-backed "exchange-traded fund" (ETF) in copper imminently.

One metals broker dealing on the LME said: "The story is that they're positioning themselves in front of the ETF. There's been a lot of speculation it's them."

Traders noted that there was no physical shortage of copper in the markets but that fears of a squeeze have persisted ever since a raft of investment banks announced their intention to launch ETFs this autumn.

Last month metal traders wrote to the Financial Services Authority (FSA) claiming that licensing the funds, which are also likely to be launched by BlackRock, Goldman Sachs and Deutsche Bank, may amount to "approving the next financial bubble".

It is estimated that if the copper funds are fully subscribed they would be looking to buy more than half the total stocks in LME warehouses.

Traders' concerns are based on the ETF model that will require the investments to be backed by physical metals, such as copper, lead, aluminium and nickel, rather than paper assets offered by futures contracts.

Daniel Major, a metals analyst at RBS, said: "There isn't a huge buffer available for the market. The supply situation can quite easily tighten in copper."

The LME moved to quash claims that a rogue speculator was attempting to corner the copper market.

Diarmuid O'Hegarty, head of compliance, said: "The LME has noted recent comments about the current circumstances in the copper market. Such circumstances are not unusual and the exchange is exercising its well established procedures for maintaining an orderly market."

He added that large trades were not a cause for concern because the market's rules dictate that holders have to lend out a proportion of their stock to ensure a smooth supply of the metal.

Fundamental supply pressures have also been pushing up the copper market. Rio Tinto, the mining giant, warned last week that next year's copper production would be lower than expectations. And a strike at an Xstrata mine in Chile, the third largest in the world, has been going on for longer than predicted.

JP Morgan declined to comment.

[x78089]

All I have to say is wow.

[frugalcanuck]

Can you say silver plated copper bars??? So this is how they plan to get out of the silver hole they dug for themselves.

[misteroman]

^^^^^ probably lol. Good for us copper hounds

[theo]

I was thinking that this dominant position in copper could allow JPM to open large short positions and suppress the price of CU much like they have with silver. While the recent increases in silver and gold has caused many to question the viability of the dollar, a continued run up in copper would cause a measurable decrease in our spending power. It could be part of an overall strategy to manage the dollar's inevitable decline.

[frugalcanuck]

I was thinking Theo's view right after I saw it was JPM. Now Cu is going to be manipulated like Ag.

[highroller4321]

I was thinking that this dominant position in copper could allow JPM to open large short positions and suppress the price of CU much like they have with silver. While the recent increases in silver and gold has caused many to question the viability of the dollar, a continued run up in copper would cause a measurable decrease in our spending power. It could be part of an overall strategy to manage the dollar's inevitable decline.

I am not so sure they will short copper. Their more profitable position would be to make copper hit $7-$10.

[Kurr]

Kinda hangin in the wind though aren't they? Couldn't China, or another, or a group of countries, dump into the market and sink their pposition?

Something I brought up with another member here, since banks routinly profit off of both sides of war, and copper is VITAL to the "war effort" could they be positioningto profit off a conflict with China or the Korean penisula?

I hadn't considered out and out fraud, like copper coated 1000 oz bars, but all things considered, it is worth considering.

What with the copper reserves of the various countries of the world, it just seems a precarious position to take to me. Not to mention the SEC could do their jobs (now stop laughing) and ruin their posistions, much like they did to the Hunts.

[AGgressive Metal]

Kinda hangin in the wind though aren't they? Couldn't China, or another, or a group of countries, dump into the market and sink their position?

China is a major net importer of copper, so anything they have to sell they would just have to buy back anyway. They buy more copper than they need at any given time, but they fully intend to use most of it rather than hoard it. With other countries, though, I have no idea. Copper prices are already high, so I imagine most copper mines are already at full capacity but that is just a guess.

I hadn't considered out and out fraud, like copper coated 1000 oz bars, but all things considered, it is worth considering.

Under the LME rules, anyone with that big of a position has to lease out most of their metal so as not to truly corner the market. If they wanted to copper-fill bars they would buy small amounts on the private market.

[AGCoinHunter]

Wouldnt this ultimately hasten the end the mintage of cents/nickels? Atleast with CU in them. Hope the melt ban isnt far behind.

[highroller4321]

Kinda hangin in the wind though aren't they? Couldn't China, or another, or a group of countries, dump into the market and sink their position?

China is a major net importer of copper, so anything they have to sell they would just have to buy back anyway. They buy more copper than they need at any given time, but they fully intend to use most of it rather than hoard it. With other countries, though, I have no idea. Copper prices are already high, so I imagine most copper mines are already at full capacity but that is just a guess.

I hadn't considered out and out fraud, like copper coated 1000 oz bars, but all things considered, it is worth considering.

Under the LME rules, anyone with that big of a position has to lease out most of their metal so as not to truly corner the market. If they wanted to copper-fill bars they would buy small amounts on the private market.

China has "PIG" farmers that are holding positions of copper, but they are no where near $1.5lb worth of copper

[mickeyman]

Here's a picture of the building where they are storing it

http://www.thebookofbiff.com/2009/09/17/853-wrinkle/