Prison For Tarnished Chinese Copper Trader

“Liu thought the price had peaked in early 2004 and would soon turn south. He reversed that call by selling short … He was wrong. Market prices continued to climb. He tried to solve the problem by running away. Liu fled soon after copper prices passed the benchmark US$3,000 per ton in early 2004. His supervisor, however, persuaded him to return to work.

Liu came back and tried to recover the losses. But like any desperate gambler, he chose to increase the stake … Copper shot up to US$3,700 per ton by October. Liu disappeared again. And SRB was left with short positions on 200,000 tons, holding a paper loss of US$606 million.

SRB formed a task force to tackle the crisis. A few months later, four auctions were launched to sell 80,000 tons of copper to Chinese companies … as the settlement date for most of positions approached, the task force shipped 66,000 tons of copper to LME’s transaction warehouses in Singapore and South Korea.

According to the court, all the short positions Liu built were closed by April 2007. To settle the deals, SRB released 133,000 tons of reserve copper for auctions and deliveries.

Chinese officials argued that the government was only responsible for half the debt to overseas securities firms that loaned money to Liu, since he had forged the loan documents.”

The numbers don’t add up, but it sounds like the foreign brokers were left on the hook for as much as 67,000 tons? Ouch.

– via niubi –

Related:

How to Lose Several Hundred Million Dollars, May 10, 2006
Copper, Phelps Dodge, and the Elusive Liu Qibing, January 28, 2006
Checking Up on the Liu Qibing Squeeze, December 1, 2005
The Squeeze Goes On (Sung to the Tune of The Beat Goes On), November 17, 2005