Zinc Has Highest Share of Bull Bets Among Money Managers on LME

Aug 05, 2014 9:08 am ET

Aug. 5 (Bloomberg) -- Zinc has the highest share of money managers’ bets on rising prices among the six main industrial metals traded on the London Metal Exchange, a report released for the first time today showed.

Money managers’ long position in zinc came to 135,849 futures and options contracts, or 30 percent of total open interest as of Aug. 1, according to the Commitments of Traders report published on the LME’s website. That compares with 24 percent for copper and 25 percent for aluminum. Money managers are net-long all six of the metals, which also include nickel, lead and tin.

The LME, home to more than 80 percent of global buying and selling of industrial-metals futures, introduced the report after calls from market participants for greater disclosure of data. The exchange is joining NYSE Liffe and ICE Futures Europe in reporting figures similar to those issued by the U.S. Commodity Futures Trading Commission. Zinc for delivery in three months on the LME reached the highest in almost three years last week amid expectations supplies will fall short of demand.

“The COTR data reflects the LME’s target business model, namely a price underpinned by the core involvement of the physical market hedging their risk, with liquidity enhanced by the participation of the broader financial community,” Matt Chamberlain, head of business development at the exchange, said in a statement today.

Copper, Aluminum

Money managers’ net-long position in zinc was 96,482 contracts as of Aug. 1, compared with 99,963 contracts as of July 28, according to the data. The net-long position in copper was 47,957 contracts at the end of last week. The aluminum net- long position was 141,277 contracts as of Aug. 1, while producers, merchants and users were net-short, or positioned for a drop, by 193,810 contracts.

The report requires four categories of LME members to classify their own positions and those of clients by type of activity. The reports break down market open interest by category of participant, similar to the CFTC, including producer, merchant, processor or user; broker dealer or index trader; money manager; other reportables; and those not defined.

Money managers are described as entities engaged in managing and conducting LME contracts on behalf of clients such as investment fund firms, according to the exchange.

The four categories covered by the reporting requirement are Category 1 members, who can trade on the exchange floor, electronically or by phone; Category 2, limited to screen and phone dealing; Category 3, eligible to trade and clear their own trades while barred from floor dealing or issuing client contracts; and Category 4, able to issue LME contracts though lacking membership of the clearinghouse.