JPM Corners Copper Market, LME Says Not To Worry, All Is Good

Tyler Durden's picture

Not content with holding the biggest paper short position in silver, JP Morgan is now intent on cornering the copper market, as the monopolist firm stretches its FRBNY-facilitated muscles in an attempt to stem the massive losses incurred via its silver short. As the Telegraph reports, following up on a story of a "rogue" purchaser who bought up $1.5 billion in copper on the LME, "the American investment bank JP Morgan is the mystery trader that grabbed more than half the copper on the London Metal Exchange." This is a huge copper purchase, and represents between 50% and 80% of the 350,000 tonnes in reserves, confirming that JPM is now the dominant manipulator in yet another commodity market. The purchase also pushed the price for immediate delivery to $8,700, the highest since October 2008. It is unclear how China, which is the biggest non-speculative end user, will react to this development, nor whether the CFTC will (ever) take any action against such blatant market manipulation. One thing is certain: the LME will do absolutely nothing: "Diarmuid O'Hegarty, head of compliance, said: "The LME has noted recent
comments about the current circumstances in the copper market. Such
circumstances are not unusual and the exchange is exercising its well
established procedures for maintaining an orderly market." He added that large trades were not a cause for concern because the market's
rules dictate that holders have to lend out a proportion of their stock to
ensure a smooth supply of the metal." And who would possibly assume that JPM may not follow the rules...

As to the reason why JPM is manipulating this latest market: simple -ETF frontrunning:

Traders said JP Morgan's name had been circulating the market all day as the most likely buyer, especially since it is about to launch a physically-backed "exchange-traded fund" (ETF) in copper imminently.

One metals broker dealing on the LME said: "The story is that they're positioning themselves in front of the ETF. There's been a lot of speculation it's them."

Traders noted that there was no physical shortage of copper in the markets but that fears of a squeeze have persisted ever since a raft of investment banks announced their intention to launch ETFs this autumn.

Last month metal traders wrote to the Financial Services Authority (FSA) claiming that licensing the funds, which are also likely to be launched by BlackRock, Goldman Sachs and Deutsche Bank, may amount to "approving the next financial bubble".

It is estimated that if the copper funds are fully subscribed they would be looking to buy more than half the total stocks in LME warehouses.

Traders' concerns are based on the ETF model that will require the investments to be backed by physical metals, such as copper, lead, aluminium and nickel, rather than paper assets offered by futures contracts.

Daniel Major, a metals analyst at RBS, said: "There isn't a huge buffer available for the market. The supply situation can quite easily tighten in copper."

It's all good, though: the LME is on top of it: "The LME moved to quash claims that a rogue speculator was attempting to corner the copper market." See, it's not rogue. It's just JPM. Ergo all is good.

As for the CFTC, we now know why they are so intent on delaying the size limit discussion: after all, any regulation will be forward looking - better let JPM accumulate all commodities it can and distribute these via hidden channels to affiliated subs before the ever so busy Gary Gensler corrupt cronies decide to raise their finger on what is increasingly an ever more blatant market manipulation scheme. At least in this case, JPM will push the price higher unlike what it is doing courtesy of its gold and silver manipulation. However, the PM market (especially Asian accounts) will soon make sure Blythe Masters is looking for a job within 3 months as we predicted a few weeks ago.

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the mad hatter's picture

China should take a long silver/short copper position to teach these fuckers a lesson.

RECISION's picture

That would already be a lock wouldn't it...?

They must be laughing up their sleeves. 

tallystick's picture

Some Chinese pig farmers standing ready to sell into this.

Kina's picture

China has JPM standing on a block of ice with a rope around its neck. Silver anyone?

Old Pecksniff's picture

Check out today's article in the Telegraph on JP Morgan's colossal long position in copper.

 

http://www.telegraph.co.uk/finance/newsbysector/industry/8180304/JP-Morg...

London Banker's picture

It's very difficult to successfully corner a market for long, especially one as diverse as copper.  Inventories have risen globally throughout 2010, only tightening on LME as JPM locked up more and more LME copper in LME warehouses.  Demand ex-JPM has fallen globally, with China in particular importing much, much less in recent months. 

JPM is taking a huge risk here, especially if the FSA decides not to authorise the ETFs.  It's worth remembering that after the Hunt Brothers were busted for trying to corner silver, that the silver price crashed by 80 percent in two months. 

JonTurk's picture

yet copper is the most fragile hard asset in case of a credit bust..they would be ganbanged via silver/copper cross..

cosmictrainwreck's picture

"with China in particular importing...less" Yep. In fact, I read somewhere a few months ago they'd been just stock-piling cathodes of Cu for a while

boooyaaaah's picture

copper, silver, gold, all manipulated
Etfs backed by paper are bad
now, Etfs backed by metal are bad

How is an honest speculator, like myself, supposed
to know if we are entering deflation or inflation

If the historic benchmarks are being manipulated.

And, another thing Tyler,
You act as if market manipulation by the FED
And TBTF banks is recent, since the mortgage crash.
I think it goes back to at least the dot com bubble of 1999
When the modification of Glass Steaggal gave the Fed and TBTF legal cover.

Just because you didn't know about it doesn't mean it wasn't happening.

And your naive solution is to buy precious metals which you admit are manipulated.

Adam Smith in the wealth of nations and moral sentiments mention the invisible hand which punishes bad markets. And no doubt brought down communist Russia also works against crooked capitalism.

This invisible hand slap down of not only evil bankers but also evil unions evil governments

cossack55's picture

"See, its not rogue"

Rogues generally have, if not ethics, at least principles, thus ruling out JPM.

CRASH JP MORGAN! BUY COPPER. Quick alert Max.

 

Oh regional Indian's picture

Oh oh! Big moves on the grand chessboard now.

First Koreas, now this.

Can you say China Baiting while making a killing doing it?

I just did!

 

ORI

http://aadivaahan.wordpress.com

 

PS: I have a fascinating e-mail to send to anyone who is interested in a totally crazy insight into their lives. But you really have to want said insight and know me well enough by now to trust enough to try it. Pretty damn awesome insight into one-self. If you find such things airy-fairy and useless, don't write. For the rest, my e-mail ID is on my design website: http://squareandc.net  just scroll to the end of the landing page.

Not an attempt to gather mail id's. You can make up a temp on on g-mail or yahoo. Just use your ZH handle to identify.

You will thank me. :-)

gringo28's picture

and $1.5b in copper is - drum roll pleeeeeaaase - 1% of annual global consumption. ka-thud. so much for that conspiracy theory....

brushfire's picture

clearly you dont have any idea how marginal demand affects commodity prices. if your point is that JPM hasnt cornered the market, fine, we agree. if you think that a small increase in marginal demand cant lead to huge price moves, your flat wrong.

mikla's picture

Interesting.  I thought fibre optics were used to support HFT.  JPM must not have upgraded their old copper switches yet.

Clearly, they actually *needed delivery* on all that metal.

gwar5's picture

More chicanery? Copper mines spit out silver and other metals too.

Can JPM control silver prices indirectly with copper price manipulation?

fiftybagger's picture

Very interesting observation, but I think the amount of silver gleaned from much higher copper prices would be of minimal impact due to the long delays involved in ramping up mining operations.  If true though, that is a sure sign that their backs are up against a wall in silver...

RobotTrader's picture

JPM is in no danger.

Whatever exotic trading scheme they concoct will be 100% supported and sanctioned by the Fed, CFTC, U.S. Treasury Dept., etc.

Because the Bilderburgers, 90% of all Bessemer Trust clients, half of the Washington elites, and many foreign governments are JPM customers.

Therefore, it is in plutocrats' best interest to allow JPM to do whatever is necessary to "hedge" any outsized futures position which they may be stuck with.

Like I said, price action of JPM itself will tell the story.

If JPM falls out of bed and breaks below the 50-day, then I'll change my opinion.

TraderTimm's picture

My cynical side agrees. My idealistic side is just sitting at the bar, morose, pounding shot after shot.

Until an example is made, the wholesale pillaging will continue. Move the goalposts, re-write laws, get special 'exemptions'. So many tricks that can be used to justify nearly anything. Wish it wasn't so, but here in the sewer we sit.

Don Birnam's picture

You there ! Bartender -- freshen this fellow's drink. There is a weekend to lose ! Just put it on the tab. My credit is quite recognized at this establishment.

RoRoTrader's picture

Cynical or not, you have to admit Robot cocnsistently pulls meaning from context, and simplifies it for everyone to understand.

My mother used to have a saying, god bless her soul; "You/we are where we are supposed to be".

If it is a sewer where we sit at least you know it, which is a start.

Arius's picture

you assume everything is and will always be fine - are you familiar with the black swan theory?

Minion's picture

JPM Chart looks very bullish. Wave 3 of 3 in uptrend, if anyone wants the wave count. ABC12 and start of wave 3 tend to look like consolidations in a range. You can look at the weekly chart and see a textbook saucer bottom, also.

I've been long since Wed. when it broke the declining wedge.

:)

I need more cowbell's picture

Geez, why junk a very valid view point? Because we all hate the plutocrat fucks? Right now until something changes it is what it is, and we should dispassionately assess it as such.

Now, what might change things? At some point, the other sharks smell blood ala Lehman and turn on their own, the wolfpack sees one of their own down, and realize hey that sucker is not only a competitior, but full of blubber as well. Nummy.

Kina's picture

On JPM all should now be watching the Emperor of China. Is it thumbs up or thumbs down.

RockyRacoon's picture

I hope there is no surprise expressed by this move by JPM.

Par for the effin course, eh?

scatterbrains's picture

Are they hedging silver or do they know some country is about to get assaulted ? Those big spikes in crude, rbob and now the copper story, make me wonder what's going on here.

RobotTrader's picture

Yes, exactly.  Crude and gasoline were trading very poorly last week, then suddenly they spiked up and are threatening to break out of a huge trading range.

Transport companies will be buying USO, UGA, etc. en masse on any breakout of this range to hedge against runaway prices.

If that happens, then the "Weimar Inflation" is upon us, and virtually every risk asset will be going to the moon, including gold, stocks, and many currencies.

Don Birnam's picture

Why, sir: here we all are -- Saturday night -- and not a single animated gif from your private stock of buxom maidens ?

Monetary Lapse of Reason's picture

Oh my... did I just hear Robot say that Gold could be going up? 

Rick64's picture

 I was thinking the same thing. They obviously know something. They are not buying 1.5B for the hell of it.

BeerGoggles's picture

hahah - effectively hedged. You seriously thought you could take them down buying silver mua ha ha

Arius's picture

+1....hmmmm....may be...

MichaelNY's picture

That's what you are supposed to think.

 

It's trying to be a distraction from the massive silver short squeeze.  You might be forgetting how stupid the sheeple really are.

junkhand's picture

i have about 10 rolls of wheat pennies that are going to the MOOON, alice.....

gatoralsoccer's picture

All cents through 1981 had the same 95% copper composition as the wheaties.  Happy to join you for the lunar voyage!!

yabyum's picture

I remember my old man pulling pre-65 silver junk coins, and saying "these will always be worth more" in the 60's-70's My last was a "war" nickle I got in change two years ago, the clerk said that it looked old...I sad no problemo and walked away happy as a clam. I do not save pre 82 US pennys or nickles, but, if I get them in change they go into the bag. The old man is smiling! He was sharp and ahead of his day!

Don Birnam's picture

+1

Interesting you should mention this, as I received a 1943-P silver nickel in change just last week. Nothing to retire on, but it will never see circulation again.

Freewheelin Franklin's picture

My Grandfather kept bags of silver dollars in the bottom of a chest freezer. I guess he would get a few from the bank every week. He had a nice little stash when he died from what I understand. Too bad his bitch sister stole it all before my Uncle could get to the house. He also had a shitload of Rolls Royce stock, that was worthless.

max2205's picture

That's what happens when Ben throws around trillions. At x leverage in commodities will make 30x leverage in mortgages seem like a firecracker.

Gringo Viejo's picture

Long copper to offset silver shorts?  Hmmmm..

This is old news but nickels (75% copper/25% nickel) are currently worth 124% of face value.

Composition of the coin is allegedly set to change in 2011.

 

Waterfallsparkles's picture

Soon people will sell the copper pipes in their house to buy food, or the copper pipes in someone elses house.  Would be a real shock to come home and find your tv still there and all of your copper pipes gone.

 

notadouche's picture

We are in the middle of a war folks.  A war not between armies but a war for the procurement of natural resources.  Gold, silver, copper, oil etc... fought between governments and multinational corporations that will leave "we the people" as collateral damage.  They are the cats, we are the ball of yarn.  A few shadowy multi billionaires trying to control the behavior of the people by dictating how we live like Maurice Strong, Al Gore, the de Rothschilds family using their wealth or political influence to rule the world through the control of how natural resources are doled out and used by the commoners using fear and intimidation.  It's the one world currency that is the next shoe to drop.  Regular folks are in deep trouble and most don't even know it.   

Monetary Lapse of Reason's picture

"Regular folks are in deep trouble and most don't even know it."

Not sure I exactly agree with how you got to this conclusion... but it is absolutely true nonetheless.  

Waterfallsparkles's picture

Wonder how much my copper tea pot is worth?