JPMorgan (NYSE:JPM) Mystery Buyer of $1 Billion of Copper

Speculation has finally ended on who the secret buyer of over $1 billion in copper has been, as JPMorgan (NYSE:JPM) was identified as the entity making the acquisitions.

The amount of copper bought by JPMorgan represents over 50 percent of all the metal lodged in official London warehouses.

Similar to silver and the Hunt brothers decades ago, it generated concerns someone was attempting to corner the copper market, creating a shortage and driving up the prices even more than they're already set to rise.

Finding out the buyer was JPMorgan caused some of the tension in the market to ease, as the copper was acquired on behalf of clients, so in reality they don't own the metal directly. Nonetheless, copper is still in the hands of one institution and its clients, giving them pricing power in the market if they continue to hold onto it.

In 2011, copper demand will be stronger than supply by just under 500,000 metric tons, which will continue to drive the price of the metal up.

Since the market became aware of large amounts of copper being acquired, it has risen by 7.2 percent on the LME since November 23. Copper in New York since that same date is up 8.1 percent.

Short term copper price are experiencing "backwardation" at this time, which is where copper needed for immediate delivery is more expensive than copper to be delivered in several months. This implies tight copper supply in the short term.

LME says it holds close to 350,000 tons of copper now, down from the 555,000 it held as of February.