LME Warehouse Scheme: What It Will Mean For the Copper Market

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From the recent NY Times article on LME aluminum warehousing practices:

“In 2010, JPMorgan quietly embarked on a huge buying spree in the copper market. Within weeks — by the time it had been identified as the mystery buyer — the bank had amassed $1.5 billion in copper, more than half of the available amount held in all of the warehouses on the exchange. Copper prices spiked in response.

At the same time, JPMorgan, which also controls metal warehouses, began seeking approval of a plan that would ultimately allow it, Goldman Sachs and BlackRock, a large money management firm, to buy 80 percent of the copper available on the market on behalf of investors and hold it in warehouses. The firms have told regulators that these stockpiles, which would be used to back new copper exchange-traded funds, would not affect copper prices. But manufacturers and copper wholesalers warned that the arrangement would squeeze the market and send prices soaring. They asked the S.E.C. to reject the proposal.

After an intensive lobbying campaign by the banks, Mary L. Schapiro, the S.E.C.’s chairwoman, approved the new copper funds last December, during her final days in office. S.E.C. officials said they believed the funds would track the price of copper, not propel it, and concurred with the firms’ contention — disputed by some economists — that reducing the amount of copper on the market would not drive up prices.

Others now fear that Wall Street banks will repeat or revise the tactics that have run up prices in the aluminum market. Such an outcome, they caution, would ripple through the economy. Consumers would end up paying more for goods as varied as home plumbing equipment, autos, cellphones and flat-screen televisions.”

Fascinating stuff – will it come to fruition? Check out MetalMiner’s latest analysis on copper investments.

Today’s Copper Prices

The day’s biggest mover broke away from a static phase with a 6.7 percent jump on Monday, July 22. After three changeless days, the price of Chinese bright copper scrap closed that much higher. Chinese copper wire saw its price rise 0.6 percent. Chinese copper bar finished the market day up 0.4 percent per metric ton. The Chinese copper cash price gained 0.4 percent.

* Get the complete prices every day on the MetalMiner IndX℠

The Japanese copper cash price rose 1.3 percent. The price of US copper producer grade 122 held steady yesterday.

Following a 0.9 percent rise yesterday, the primary copper cash price closed on the LME at $6,920 per metric ton. The 3-month price of copper rose 0.6 percent on the LME to $6,925 per metric ton after a two-day drop.

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