The Chinese Copper Trader Who Vanished Without a Trace

In November 2005, a 36-year-old copper trader for the Chinese government stopped answering his phone. His apartment door stayed shut. He did not show up at work. His employer, the State Reserve Bureau, first told the London Metal Exchange that the man did not exist. Then they said he acted alone. Then they stopped talking. Chapter 20 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Liu Qibing, who shorted up to 200,000 tons of copper on the LME and vanished when the bet went wrong.

The Trader

Liu Qibing came from a farming family. He joined the State Reserve Bureau in 1990, when he was about 21. The SRB manages China’s strategic reserves. Oil, metals, grains. The stuff a country keeps in storage for emergencies. Liu was sent to London for training at the LME. He learned futures trading, developed contacts, built a reputation in copper.

By 2005, he was one of the SRB’s key traders. Effectively betting with the reserves of the most populous country on Earth.

The Bet

The thesis was not crazy. Liu and the SRB expected copper supply to increase by the end of 2005. New mines coming online, producers expanding. More supply means lower prices. So Liu shorted copper. He sold futures contracts for between 100,000 and 200,000 tons, betting the price would fall.

The problem was the other side of the equation. China itself was why copper prices were going up. The country accounted for 25% of global copper consumption. Demand growing at 15% per year, compared to 2.5% in OECD countries. China was building cities, highways, power grids. All of that requires enormous amounts of copper.

Between 2003 and 2005, copper had climbed from $1,500 per ton to over $4,200. And it kept climbing. The supply increase Liu was counting on never materialized. Higher costs. Strikes. An earthquake disrupted a major mine. The copper that was supposed to flood the market did not arrive.

The Disappearance

When copper broke above $4,000 per ton in November 2005, Liu Qibing broke off all contact. His cell phone went silent. His apartment door never opened. He stopped showing up to work. He just disappeared.

The comparison to Hamanaka from Chapter 17 is hard to miss. Both were copper traders on the LME. Both accumulated positions large enough to move the market. But the direction was opposite. Hamanaka went long. Liu went short. Both lost hundreds of millions.

When the LME contacted the SRB about the massive short position, the first response was remarkable. Liu Qibing does not work for us. The man does not exist. That is a bold move when the exchange has years of trading records with his name on them.

Later, the story changed. Yes, Liu worked for them. But he acted alone. Rogue trader, no authorization. Same playbook companies have used for decades. When losses come out, the trader was always acting alone.

Eventually it came out that Liu had been placed under house arrest. Not prison. House arrest. The details were never fully public.

Fighting the Market

The Chinese government tried to push prices back down. They auctioned 50,000 tons from the state reserve. Claimed to have 1.3 million tons in storage. The market did not believe them. Analysts estimated the real number was about half that.

Then the hedge funds showed up. In China, they call them “crocodiles.” Western traders who saw the SRB trapped and took the other side. When you know your counterparty has to cover eventually, you buy and you wait.

Copper did not come down. It climbed to $5,000 per ton in January 2006. Then $6,000 in April. Then $7,000. It peaked near $8,800 in May 2006. More than double the price at which Liu had placed his shorts.

The exact losses were never officially disclosed. Based on position sizes and price movement, the damage was in the hundreds of millions.

What Stays With Me

A few things from Dennin’s account stick with me.

First, the irony. Liu shorted copper because he expected more supply. But the reason supply was tight was China itself. China’s own construction boom was driving prices up. He was betting against his own country’s economy. His own country won.

Second, the institutional response. Deny the trader exists. Then say he acted alone. Then auction copper to push prices down. Then go quiet. The SRB handled this the way bureaucracies handle embarrassment. But the market does not care about press releases. The market cares about supply and demand. And demand was real.

Third, the disappearance. In western rogue trader stories, the trader gets arrested, goes to trial, goes to prison. Nick Leeson. Hamanaka. There is a public process. With Liu Qibing, the man simply vanished. House arrest, silence, no public trial. For a case involving hundreds of millions in losses on a global exchange, the ending is strangely quiet.

The pattern from Chapter 17 repeats with a Chinese twist. One trader, too much authority, a position that grows until it cannot be hidden. At Sumitomo, there was a trial, a conviction, eight years in prison. With Liu Qibing, there was silence. Sometimes the most telling part of a financial scandal is not the losses. It is what happens to the people responsible when the losses come out.

Previous: Chapter 19: Palladium

Next: Chapter 21: Zinc Katrina

This is part of my From Tulips to Bitcoins book retelling series.