One unidentified company holds 90 percent or more of copper stockpiles in warehouses monitored by the London Metal Exchange, the latest bourse data shows.
The so-called dominant position indicated in the Warrant Cash Banding Report was previously 50 percent to 79 percent and moved to the higher band on Dec. 10, according to data from the bourse. The figure includes stockpile holdings and open positions for the next three trading days. Each warrant represents one lot of metal, equal to 25 metric tons.
The fee to borrow copper for next-day delivery, also known as the tom-next spread, jumped to a premium of as much as $13 today, the most since July 2009. It was last at a discount of 50 cents. LME rules oblige holders of dominant positions to lend metal at fixed rates.
“The dominant long is even longer than they were previously, and it’s having an impact,” Robin Bhar, an analyst at Credit Agricole SA’s investment-banking unit in London, said by phone today. “It’s forcing short-term rates to borrow metal to go higher.”
The bourse’s lending guidance applies to a separate notice, called the Warrant Banding Report. That comprises of stockpiles and open positions for the next two trading days. The dominant position in that report was still at 50 percent to 79 percent on Dec. 10.
Copper prices climbed to a record in London today and have jumped 24 percent this year on speculation miners and recyclers aren’t producing enough supply to keep up with demand. The shortage will widen to 500,000 metric tons next year from 200,000 tons this year, BNP Paribas SA said in a report today.
Stockpiles in warehouses monitored by the LME fell 30 percent to 350,900 tons this year. Copper for delivery in three months, the benchmark contract, dropped 0.7 percent to $9,165 a ton in London, after earlier reaching a record $9,267.50. That would value 90 percent of LME monitored stockpiles at about $2.9 billion.
The current situation in the copper market is “not unusual and the exchange is exercising its well-established procedures for maintaining an orderly market,” Diarmuid O’Hegarty, deputy chief executive officer of the LME, said in a comment e-mailed by the exchange.
JPMorgan Chase & Co. was holding the dominant position in copper, the Daily Telegraph reported on Dec. 3, citing unidentified people. Jennifer Zuccarelli, a spokeswoman for the bank in New York, said JPMorgan doesn’t hold 90 percent or more of the copper stock warrants. She declined to comment if the bank holds a dominant position of less than that amount.
Dominant positions exist in other LME metals, the Warrant Cash Banding Report shows. One unidentified firm holds 50 percent to 79 percent of the aluminum alloy stockpiles and one party controls 50 percent to 79 percent of the nickel inventory. In zinc, one company has 50 percent to 79 percent of the metal.