Copper scandal prompts SRB to ban trading

China is to ban units within its State Reserves Bureau (SRB) from trading in equity, foreign exchange, corporate bonds and derivatives, according to newswire reports in Beijing.

The state-owned agency, which manages reserves of copper, oil and grains, admitted that it had taken the decision “to avoid more huge losses on investments” after state metals trader Liu Qibing reputedly lost $300 million last October in wrong-way short positions on an estimated 200,000 tons.

Liu officially worked for the separate State Regulation Centre for Supplies Reserve, but it later became apparent that he was in fact trading on behalf of the SRB. He has not been seen since the scandal broke, and the SRB says it is unsure of Liu’s whereabouts.

A deadline to settle the position passed on December 21, and metals analysts believe the bureau was allowed to roll forward most of the deliveries over the next three years. It had been hoping that prices would fall, but prices have soared after traders became dubious of SRB announcements that it had huge stockpiles to release into the markets.

Robin Bhat, a metals analyst at UBS in London, said the decision to put off payment could further backfire for the Chinese. “They have rolled forward presumably in the belief that the price would fall,” he said. “But it’s another bet that they’ve made and it could deal them a serious blow. We seem to be delaying the day of reckoning.”

The price of copper has continued to climb since then, and reached a record high of $4,615 per ton earlier this month on the London Metals Exchange – some $700 above trading when the scandal broke, adding to the cost of settling the position.