SIGNALS from Beijing that an avalanche of copper was heading for the market caused the metal’s price to dip yesterday, but commodity traders continue to second-guess the Chinese Government, reckoning that plans for a new round of copper sales are further evidence of China’s short position in the metal.

The base metals market is agog over rumours that Liu Qibing, a Chinese government copper trader, sold short up to 200,000 tonnes of copper, prompting a panicky reaction from Chinese government agencies. The copper price tumbled early yesterday to $4,050 per tonne from Tuesday’s record of $4,174 as China’s State Reserve Bureau (SRB) auctioned 20,000 tonnes of the metal and signalled plans to sell another 20,000 tonnes in a week’s time. The price recovered, rising to $4,100 as a cynical metals market interpreted the selling strategy as a feint.

Yesterday copper traders reported that the SRB was seeking permission from the State Council to export 200,000 tonnes of copper stocks. “These events are connected,” Ingrid Sternby, a metals analyst at Barclays Capital, said. “They are trying to . . . put downward pressure on the copper price.”

Copper traders are convinced that the SRB is trying to minimise potential losses on alleged short sales conducted by Mr Liu, the chief trader in SRCSR, the government body that trades metal for the SRB. He is thought to have sold between 150,000 and 200,000 tonnes of London Metal Exchange (LME) copper futures for delivery in mid-December.Mr Liu would have been betting that copper prices had peaked and were about to fall, a commonly held view months ago, when the market was anticipating new mining supplies. Had the price turned, the contracts would have been hugely profitable, but mining delays and continued strong demand have kept the copper price hot, rising 15 per cent in two months.

At first Chinese officials denied Mr Liu’s existence, but later they suggested that he was on leave and that the short-selling had been done on his own account.

The LME appears to be relaxed: a spokesman insisted that it had scrutiny of every contract that passed through the exchange. So far, no one is signalling a default.

METAL MOVES

• In 1998 the London Metal Exchange (LME) took steps to prevent a recurrence of the 1996 Yasuo Hamanaka copper scandal
• Dealings had to be more clearly identified to give clients certainty that they were purchasing registered LME contracts. The exchange also started to publish daily information on large trading positions
• The LME also said that it would require access, on request, to detailed information from warehouses on such things as the identity of the party to whom metal had been released