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CORRECTED-Chinese coal miner piles on bullish copper bets, fuelling rally -source
October 24, 2017 / 9:08 AM / a month ago

CORRECTED-Chinese coal miner piles on bullish copper bets, fuelling rally -source

(Corrects paragraph 7 to show Shanxi Securities is listed in Shenzhen, not Shanghai)

* Gelin holds 35 pct of 1H 2018 SHFE copper open interest -data

* Position of over 70,000 contracts - data

* Position notional value over $2.8 bln - Reuters calculation

* Private coal investor behind the bullish position - source

By Meng Meng and Melanie Burton

BEIJING/MELBOURNE, Oct 24 (Reuters) - A private coal mining industry investor in Shanxi province is the main actor behind a dramatic increase in bullish bets in Chinese copper futures, a person familiar with the matter said, driving a futures brokerage to a nearly $3 billion position that has fuelled a surge in prices to 4-1/2-year highs.

The position has been built up over the past year through futures broker Gelin Dahua Futures Co Ltd, the person said, declining to be identified because he was not authorised to talk to media. Gelin Dahua is headquartered in Beijing and owned by securities firm Shanxi Securities Co.

Gelin Dahua holds more than 35 percent of the open interest in copper contracts for the first half of 2018 on Shanghai Futures Exchange (SHFE), exchange data shows, worth $2.8 billion according to Reuters’ calculations based on contract data.

At the close of business on Monday, it was holding just under 70,000 contracts spread out across the futures contracts for delivery in the first half of 2018 [0#SCF:], the data showed. For April, May and June futures, Gelin’s positions accounted for at least 60 percent of the total open interest in those contracts.

The person with knowledge of the matter would not disclose the identity of the coal miner, the size of its position out of the broker’s total, nor the strategy behind it. It wasn’t clear whether other investors from the coal industry are also involved in the copper bets.

Officials at Gelin Dahua and Shanxi Securities were not immediately available for comment.

Set up in 1993, Gelin Dahua has 27 branches across the country and offers commodities futures broking in China’s so-called “black” commodities: coking coal, coal, copper and steel, according to its website. Shenzhen-listed Shanxi Securities has a market capitalisation of about $4.4 billion.

The broker’s large holding has attracted attention across the global base metals market over the past week, with traders citing it as helping drive the recent price rally.

Over the past month, Shanghai copper prices have jumped more than 10 percent, driving gains on the London Metal Exchange. China is the world’s largest copper producer and consumer.

The emergence of a private coal miner with the funds to make such a splash in copper highlights the dramatic change in miners’ fortunes over the past two years, after government-enforced mining cuts spurred a historic jump in coal prices.

Listed coal miners turned in the best profits out of all Chinese commodity companies in the second quarter.

It also suggests investors are branching out, with Beijing trying to prevent overheating in China’s property market and introducing curbs in equity markets over the past two years.

Reporting by Meng Meng in BEIJING, Melanie Burton in MELBOURNE, Ruby Lian in SHANGHAI and BEIJING newsroom; Writing by Josephine Mason; Editing by Gavin Maguire and Kenneth Maxwell

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