Tin traders have warned of a “disorderly” market in the metal with a single fund believed to have taken control of almost the entire stock of metal in warehouses owned by the London Metal Exchange.

The large holding in warrants to hold physical tin, amounting to more than 90 per cent of existing stocks, has helped to push up the short-term price of tin to a big premium over three-month futures, despite a worldwide surplus in tin. The short-term price surge means that industrial buyers of tin that want the metal today are forced to pay a cash premium of $730 per tonne over the price in three months’ time, despite there being no shortage of stocks. Some buyers have complained about price distortion and have called for an investigation of the dominant position.

The owner of the large position is unknown, although names mentioned include Ebullio Capital Management, a hedge fund based in Southend-on-Sea, Essex, as a possible holder of the warrants.

The scale of the position has caused raised eyebrows among analysts and LME traders.

“No one believes the market is tight. Inventories are getting higher every day,” a senior metals analyst at a leading investment house said. Stocks of tin bottomed out in November at about 3,000 tonnes but have since climbed to about 25,000 tonnes.

Tin is a relatively illiquid market, said the analyst, compared with the main LME contracts, such as copper or aluminium, where stocks have risen to 4.5 million tonnes. The price of tin is volatile and has suffered violent falls in the space of a few days. “It is a dangerous game to play,” said the analyst of the fund’s decision to corner such a large volume of warrants.

One leading LME trader said a decision to hold such a large position in warrants was odd given the incentive to make a profit selling metal today while buying back at the cheaper price three months forward. “It’s a strange situation,” he said.

The LME yesterday confirmed that there was a dominant position with control of more than 90 per cent of outstanding warrants.

Under its rules, the LME steps in and forces a holder of more than 90 per cent of warrants or cash position to lend to third parties to ensure an orderly market.

Diarmuid O’Hegarty, head of regulation at the LME, said the market was not disorderly and suggested the situation reflected uncertainty about the future. “This is a two-sided argument about whether there will be a shortage or a surplus in the future,” he said.

The three-month tin price has risen by 40 per cent since the beginning of the year to $14,000 per tonne. There are relatively few big sources of supply, including mines in Peru and Bolivia as well as Indonesia and artisanal mining in the Democratic Republic of the Congo.