Copper Price Shrugs Off Sumitomo Blues

Prospects that China may buy copper for its strategic stockpile helped drive the price to its highest on Wednesday since the Sumitomo Corp scandal last June.

The London Metal Exchange (LME) flagship copper contract rose sharply in early trading as speculative buy-stops and waves of short covering were triggered after it broke above the 1997 high of $2,313 a tonne.

Three months delivery copper raced to an eight and a half-month peak of $2,360 for a gain of almost $75 on Tuesday afternoon.

Traders said the move came against a backdrop of renewed nearby tightness and expectations that China might buy copper to replenish strategic stocks.

 

There is some concern that there will be a rush of Chinese demand, said brokerage GNI Ltd. The premium of cash copper over three months delivery was last indicated at $80/$85, versus $72/$82 on Tuesday. Traders said they expected this backwardation to widen.

Values are the strongest since the throes of a price collapse that accompanied the dismissal by Japans Sumitomo Corp of its star copper trader, Yasuo Hamanaka.

Hamanaka, on trial in Tokyo for forgery and fraud, was alleged by the Japanese firm to have lost it $2.6 billion in maverick trades.

He had been the mastermind of the world trade in copper.

A hoard of stocks that he controlled kept prices high and his exit triggered a collapse. Some traders say the impact is not yet over.

Aluminium matched the gains in copper on Wednesday and moved to test resistance at $1,600 a tonne.

Elsewhere in the commodity markets, coffee prices were again under pressure as selling continued to hit a rally that had taken them up by around 50 per cent in a few weeks.

Speculative liquidation was renewed on the London market for robusta grades of coffee beans. London May futures for the lower quality robustas rose to a peak of $1,705 per tonne on Friday. By mid-morning on Wednesday they had dropped as low as $1,460.