INSUBCONTINENT EXCLUSIVE:
It was the focal point for a multi-billion-dollar cash-for-copper trade, whereby Chinese companies would use metal as collateral for cheap
bonded warehouses are all but empty
The once-frenetic flow of metal into the stockpile has come to a juddering halt as two dominant financiers of Chinese metals, JPMorgan Chase
and ICBC Standard Bank Plc, have halted new business there
Numerous traders and bankers interviewed by Bloomberg said they believe the trade is dead for now, and some predicted the bonded stocks
reliant on imports to meet its near-term needs at a time when global stocks are already at historically low levels
The Chinese copper market is at its tightest in more than a decade as traders pay massive premiums for immediate supplies.
For now, the
miners, traders and financiers arriving in London this weekend for the annual LME Week jamboree are largely cautious on the near-term
prospects for copper, given concerns about the global economy
But many in the market say they are braced for price spikes when the macroeconomic news eventually improves
Drakewood Capital Management Ltd
Instead, the traders directed it into the bonded stockpile, using the metal to raise financing
An expansion of government credit to support trade and infrastructure meant there were many easy opportunities for companies to raise money
reinvested in other areas, such as the red-hot property market
Many Chinese companies with no connection to the commodities industry hired teams of traders and bankers to get into the copper game
held about a million tons of copper, worth some $10 billion
This month, they totaled just 30,000 tons, according to industry consultancy Shanghai Metals Market
have been in the market for over 15 years.Warehousing Fraud
The decline began several years ago, with the massive warehousing fraud at
Qingdao in 2014 that caused many banks and traders to reassess their appetite for the Chinese metals industry as a whole.
But it
the economic slowdown: the metal just hasn't been going into bonded warehouses.
But the consequence of the collapse in stocks is already
Copper for immediate delivery on the Shanghai Futures Exchange traded this month at a 2,020 yuan premium to copper for delivery in three
