JP Morgan Denies It Holds More Than 90% Of The Copper Market... No Statement On Whether It Holds 89%

Tyler Durden's picture

As we reported last weekend, in addition to the now indirect admission from JP Morgan (and to all those who are expecting an official 8K from the firm which opens it up to market manipulation litigation, we can only hope they manage to grow out of their childish naivete soon) that it did in fact have a major silver short position, it has been recently speculated that JPM's monopolistic tentacles have reached out to the copper market, of which JPM is now rumored to control 50% to 80%. Today, we get an official non-admission admission from JP Morgan that it does not in fact own over 90% of the silver market. Well, that's not really useful, as that "admission" says nothing about owning up to a whopping 89.9% of the copper market: a stake which would make JPM the biggest one-man cartel in the history of the industrial metal. Per Reuters: "U.S. investment bank
JPMorgan said it does not hold more than 90 percent of copper stock
warrants in London Metal Exchange warehouses, but declined on Tuesday to
comment on whether it had a smaller position.
" It also appears that per the LME the position is now no longer "only" 50-80 but has grown to 90%: "
A single holder, recently controlling 50-80
percent of copper stocks and cash contracts in London Metal Exchange
warehouses, appears to have raised the position to above 90 percent,
latest data from the world's biggest metals market showed." And for those who wonder why one entity controlling the entire market is not good here is the explanation: "
some say it is one of the reasons why copper hit a record high of $9,267.50 a tone on Tuesday." Oddly enough, JP Morgan did comment on the firm's holdings in copper, which it so far has refused to do vis-a-vis its silver position: "A spokesman for JPMorgan, asked by Reuters to
comment on the market talk, said the company did not hold more than 90
percent but declined to comment further.
" And this is the environment in which the CFTC still obstinately refuses to impose position limits lest it derail the massive profit scheme that one-time or recurring monopoly holdings represent for the big banks.

Some more from Reuters:

At present one company holds dominant positions of between 50-80 percent in both nickel and zinc cash contracts and stock warrants.

The LME has the power to step in and force such long position holders or "longs" to make metal available to other market players by imposing its lending guidelines, which are aimed at ensuring orderly markets.

Under these guidelines, if an LME member or client holds 50 percent or more of the warrants or cash today/cash positions, it should be prepared to lend at a premium that is no more than half a percent of the cash price for a day.

A spokesman for the LME futures market, which is one of the few remaining open outcry exchanges, declined to comment on the copper position.

"I suspect it could all turn out to be a bit of a storm in a tea-cup," said Gayle Berry, analyst at Barclays Capital.

And while the LME sees no problems with cartel-like behavior, throw in some synthetic products like ETFs and ETPs and you will soon get total confusion:

Falling ore grades, disruptions and project delays also mean that copper supply will, possibly starting this year, fall short of demand estimated at about 19 million tones this year.

Highlighting such tightness, since February, LME copper stockpiles have dropped by more than one third to 350,900 tones, from six-and-a-half year highs of 555,075 tones in February.

"If you have inventories that continue to be drawn down, then you're going to have a concentration as a function of that," Berry at Barclays said of the copper dominant position.

"Then throw into the mix the potential for warrant buying for the exchange traded funds, that's what is all adding to this," she added.

Last week, ETF Securities' physically backed copper, tin and nickel exchange-traded products (ETPs) made a tentative debut in London, as investors sought to gauge sentiment ahead of potentially larger offerings.

Deutsche Bank said in October ETPs backed by copper could hold 300,000 to 400,000 tones of metal.

Concerns that ETPs will exacerbate tight supplies of copper helped propel prices higher.

The biggest loser in all of this is of course China, will continues to be the biggest single end user of the metal, and instead of speculating, is forced to actualy cash out on purchases (most of which are on record credit numbers). Which means that even more inflation is about to be exported to the world's most populous country, which in turn means that the interval until the biggest inflation/credit bubble pop is getting ever shorter.