According to copper traders who dealt with him routinely over the past several years, Liu had taken "short" positions in copper in recent months—borrowing the industrial metal at current prices to sell to others, hoping the price would fall before he was due to replace what he had borrowed. Traders say he built up a huge position, shorting some 100,000 to 200,000 tons of the metal. But because copper prices have soared lately, Liu and the SRB—a secretive state agency responsible for buying strategic commodities—may have to absorb big losses, possibly up to $100 million, according to traders.
About a month ago, Liu, in the words of one London trader, "simply vanished." The Financial Times quoted a source saying that last week Liu was at home in Shanghai with his cell phone turned off, but TIME was unable to confirm this. Meanwhile, the SRB has appeared to disavow his deals; the state-owned China Daily newspaper quoted an SRB official saying that any losses were the result "of personal actions" by Liu "instead of the government."
The question now is whether Beijing will step up and cover Liu's losses by providing the huge amounts of copper he borrowed, due by Dec. 21. Early last week, the Chinese government insisted it had sufficient copper reserves to cover the amount owed. But by week's end, according to some traders, it appeared that China was dumping copper reserves in an effort to drive the price down—a move few in the copper market believe will succeed. Indeed, last Friday copper prices rose to a new record level. Traders and commodity industry attorneys say they would be stunned if the Chinese government reneges. "It's one thing to have a rogue trader on your staff," said one lawyer. "That happens. But I'd be amazed if China wanted a reputation as a rogue nation in these markets, where it has become such an important player."