Who Is Mr. Copper?
Mr. Copper was a popular nickname for Yasuo Hamanaka when he used his position as head of the metal-trading division of the Japanese trading company, Sumitomo, to corner the world copper market.
- Mr. Copper, or Yasuo Hamanaka, rose to prominence in the mid-1980s by making aggressive and illegal investment strategies in copper futures and options.
- At one point Hamanaka controlled 5% of the world's copper supply, which proffered him another nickname: Mr. Five Percent.
- In the aftermath, regulations established by the London Metal Exchange have eliminated the possibility of a repeat of this kind of commodities market cornering.
Understanding Mr. Copper
Mr. Copper, or Yasuo Hamanaka, rose to prominence in the mid-1980s by making Sumitomo the largest copper trader in the world thanks to aggressive and illegal investment strategies in copper futures and options. At one point Hamanaka controlled 5% of the world's copper supply, which proffered him another nickname: Mr. Five Percent. Hamanaka was reportedly especially proud of this latter nickname, as it was a name also associated with famed oil trader Calouste Gulbenkian.
Before being revealed as the rogue trader who was ultimately responsible for $2.6 billion in losses for Sumitomo, Hamanaka was widely admired for his copper market investment strategies, which made Sumitomo a world leader in copper in spite of the fact that the company had no copper mines of its own.
Ultimately, Hamanaka was convicted of fraud and forgery and jailed for seven years, and while Sumitomo denied knowledge of Hamanaka's illegal trading activity, the company ultimately paid out $150 million to settle claims with regulators.
How Mr. Copper Cornered the Commodity Market
Hamanaka was able to handily manipulate the copper market because he had acquired numerous futures contracts for Sumitomo, over and above their significant holdings of physical copper. Because copper is an illiquid commodity, the 5% copper holdings of Sumitomo put them in a dominant worldwide position, essentially giving them the ability to control the world copper price through the London Metal Exchange. Hamanaka used his power to his advantage, relying on cash and maintenance of long positions in copper to force out investors who tried to short the commodity. While Hamanaka's market manipulations were common knowledge among traders, the London Metal Exchange was not required to report on positions, and so data revealing Hamanaka's actual degree of control was not available to prove his activities.
Additionally, Sumitomo was able to add to their overall profits via commissions on transactions. The significant bump is due to the price of copper being artificially high for such a long period of time.
This all began to be revealed after market conditions changed in the 1995, and an increase in copper supply laid the ground for a market correction. Sumitomo's long positions in copper at the time made for a significant liability to the company, and it was in 1996 that Hamanaka's rogue trading was revealed.
In the aftermath, regulations established by the London Metal Exchange have eliminated the possibility of a repeat of this kind of commodities market cornering.