Posted on 06/03/2012 4:36:11 AM PDT by TigerLikesRooster
05.30.2012 16:08
Hot Copper Shorts Burning Commodity Firms
As prices soar, Jiangxi and others say they've been forced to cover short positions by exporting
(Beijing)–China has long been the world's largest consumer and a net importer of copper, which makes exporting large quantities of the metal seem counterintuitive.
Yet Jiangxi Copper International Trading Co. Ltd. announced in May that it would join hands with other domestic traders and smelters and begin exporting refined copper, shipping it to transaction warehouses designated by the London Metal Exchange (LME).
The firm, a subsidiary of China's largest copper producer Jiangxi Copper Corp., said it will ship an undisclosed quantity over the next few months in lieu of cash to settle short-position contracts.
Hu Jianbin, Jiangxi's chief analyst, said the trading firm would lose money – about 1,718 yuan per ton – on the deal. But it was a still a wise decision because selling the stocks at home would cost the company 704 yuan more a ton, he said.
Indeed, copper prices in China have been depressed for a while since the economy slowed, dragging down demands for copper in manufacturing and construction.
"Many enterprises that use copper as a raw material have suspended production," Hu said. "Domestic copper prices are hovering at low levels."
Meanwhile, prices of copper sold through LME remain much higher than late last year, contrary to many Chinese firms' expectations, which means settling short positions would cost them money.
No wonder Jiangxi is "not the only one considering exporting copper for settlements," Hu said.
(Excerpt) Read more at english.caixin.com ...
P!
Ouch!
Wow, that seems pretty rare - to cover a short position with the actual commodity.
Anyone here done that? - I know of exactly 1 person who did that with Silver futures.
I’ve read elsewhere that they were using the copper (and other commodities) as collateral to cover real estate loans.
Didnt China just spend the last couple years stockpiling the stuff? I am suprised to see this company selling something valuable for something worth a lot less, dollars
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