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Copper price game, risk controllable.
Mining magnate Luoyang Molybdenum Industry , get into trouble.
In the middle of May, a news said that its wholly-owned subsidiary IXM (Akeson) held a large number of short positions in copper futures on the Chicago Mercantile Exchange (COMEX) and was buying physical copper everywhere to complete delivery in July.
Akerson, headquartered in Switzerland, is the world's third largest mineral trader, with revenue of 169.3 billion yuan last year.
He is suspected to have been sniped by "multiple heads".
One signal is that the price of US copper (07 contract) hit new highs one after another. On the 15th, it touched the high point of US $11300/ton, and once climbed to US $11500/ton. As of press release, it was US $11000/ton.
It is believed that the bulls are making moves to push up the price, which is intended to defeat opponents such as Lomo. Some people compare this with the "Qingshan Nickel" incident and worry about the large amount of losses.
Rumors spread quickly. From May 15 to the closing of May 22, Luoyang Molybdenum Industry's A-share share price fell by 13%, and its market value evaporated by 27 billion yuan.
"The risk is completely controllable." The official made it clear.
1
Overnight counterattack
On May 17, the board of directors of Luoyang Molybdenum Industry drafted a 757 word announcement overnight, disclosing an important information - hedging transactions.
What Akeson does is "cross market arbitrage" trade. When COMEX opens "copper" short orders, it will also open multiple orders of the same amount in the London Metal Exchange (LME) for hedging, not bare short orders.
This clearly distinguishes it from the "Aoyama Nickel" incident, which only unilaterally held "short position" contracts at that time.
The announcement said that Akeson did not engage in purely speculative transactions, but had a strict risk control system, and its hedging and arbitrage trading strategies across markets, periods and varieties were completely controllable.
As of 19:00 on May 21, the price of US Copper 07 had dropped to US $11005/ton (converted), the price of Luntong was US $10608/ton, and the price difference between the two places had narrowed to US $397.
This means that Akeson's multiple orders in London are profitable. One loss and one gain, the loss amount is the price difference between the two markets multiplied by the position.
Its position is not clear.
"If the price difference is widened again, the traders cannot deliver on time, and the risk will expand." Gan Canrong, a senior futures industry person, told 21CBR.
The key is whether Akeson can find enough physical copper delivery for its short position in COMEX.
Luoyang Molybdenum is one of the top ten copper producers in the world. There are two copper mines in Congo (Kinshasa). The company plans to produce 548000 tons of copper in 2024.
There are two types of copper products: one is high purity cathode copper, namely electrolytic copper, which can be delivered in some futures exchanges; Second, copper concentrates, raw materials for copper smelting, cannot be delivered.
"No amount of unrefined copper ore can meet the demand for short-term contracts, and ultimately it depends on the quantity of the buyer's application for delivery." Gan Canrong explained.
Akeson's business covers the world and has a mature logistics system. In theory, it can raise physical copper from all over the world or change the destination of goods.
None of this is easy.
At present, there are about 178000 US copper 07 contracts, equivalent to 2 million tons of refined copper. Some analysts pointed out that even if all the global deliverable sources are integrated, it is also less than 20% of the current position.
More seriously, according to the latest report of Citigroup, the copper futures market in New York and London has attracted $25 billion of speculative long capital, and most of the capital bet that the global copper price will hit $15000/ton in the future.
"If speculative capital judges that the goods of these enterprises are not enough, it will continue to close the position," said Gan Canrong.
The forced market may continue.
2
Scale expansion
"The record copper price and the company's record copper output in 2024 will also provide strong support for the performance." Luoyang Molybdenum Industry expressed confidence in the clarification announcement.
In other words, if the price rises, its copper products can sell at a good price and contribute a lot of income.
In recent years, this company has become a big player in the mining industry by sweeping goods around the world and rapidly increasing its assets.
Since 2016, Luoyang Molybdenum Industry has invested a total of 3.75 billion dollars twice to buy 80% equity of TFM Copper Cobalt Mine.
In the same period, another US $1.5 billion was offered to acquire the Brazilian Niobium Phosphate Project and reorganize and establish Lomo Brazil.
"We seized the opportunity in the downturn of the industry, which was a very difficult time for the mining industry," Li Zhaochun, vice chairman of Luoyang Molybdenum Industry, recalled.
At present, its mine resources are distributed in western China, Indonesia, Brazil, Congo and other places, producing copper, cobalt, molybdenum, tungsten, niobium, phosphorus and other metals.
In 2023, Luoyang Molybdenum Industry will produce 419500 tons of copper and 55500 tons of cobalt. "Copper production is close to the top ten in the world, and cobalt production is the first in the world," the financial report said.
By the end of March this year, the total assets of Luoyang Molybdenum Industry had reached 177.6 billion yuan, up 2.7% year on year.
Such a huge resource territory tests the operation of the trade side.
Fortunately, it has already set up a chess game, invested about 500 million dollars to acquire Akeson, and has a global resource trading system.
"Judge the relationship between supply and demand, catch the opportunity of price mismatch, buy in the cheap market and sell in the expensive market, so as to lock in profits." Luoyang Molybdenum Industry described the operating mechanism of IXM in this way.
Last year, IXM completed 2.73 million tons of physical trade in concentrate and 3.18 million tons of physical trade in refined metal.
We should focus on mining and trade at the same time.
Luoyang Molybdenum Industry earned 186.27 billion yuan last year, 90% of which came from mineral trade. However, compared with the trading end, the gross profit rate of the mining and processing end of minerals is higher, reaching 40.5%.
It happened that this time, it was the key place at the trade end that got into trouble.
3
get rid of the stale and take in the fresh
The actual controller of Luoyang Molybdenum Industry is Yu Yong, holding 25.83% shares.
Yu Yong is low-key and has not held any position in the company.
His current chairman is Yuan Honglin, 57 years old. He graduated from Nanjing University and has rich experience in strategic planning, enterprise management, etc.
Yuan Honglin
Its second largest shareholder is Ningde era 。
Ningprince Sichuan Times indirectly holds 24.68% shares of Luoyang Molybdenum Industry through Luoyang Mining Group.
"Ningde era needs a stable and sustainable supply to ensure the stable and sustainable purchase of raw materials (lithium, nickel, cobalt)," Gan Canrong said.
Last June, two Ningde Times executives, Lin Jiuxin and Jiang Li, joined the board of directors of Luoyang Molybdenum Industry as non-executive directors.
Zheng Shu, chief financial officer of Ningde Times, also joined the company as a supervisor. All three "voluntarily give up the post salary provided by Luoyang Molybdenum Industry".
Joining hands with Ningwang, this mining enterprise optimizes the allocation of resources, discards the old and accepts the new.
Last year, Luoyang Molybdenum Industry sold 80% of the rights and interests of NPM copper and gold mine, and obtained rich profits.
It and the consortium CBC of Ningde Times obtained the mining rights of two lithium salt lakes in Bolivia.
CBC will build two industrial parks based on Bolivia's two major salt lakes, Uyuni and Coipasa, and the capacity of battery grade lithium carbonate in each park will reach 25000 tons.
The company has set a new goal and will initially enter the ranks of the world's top mining companies in the next five years:
The annual output of copper metal is 800000 to 1 million tons, cobalt metal is 90000 to 100000 tons, molybdenum metal is 25000 to 30000 tons, and niobium metal is more than 10000 tons.
"Every one percentage point increase in TFM copper recovery rate will bring benefits of 30 million US dollars; every one percentage point increase in Brazilian niobium recovery rate will bring about an increase of 6 million US dollars."
Sun Ruiwen, president, wrote in a letter to investors that the company still has huge room for improvement in cost reduction and efficiency increase.
Sun said that the market fluctuation is temporary, and he is optimistic about the demand brought by industrial upgrading and energy transformation.
The price is determined by the supply and demand relationship for a long time, but the capital market is treacherous and unpredictable.
Photo source: Luoyang Molybdenum Industry, except for the label
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