Variation margin calls drove China copper smelter insolvent

Ill-considered futures trade claims first victim of tighter post-Qingdao financing climate

An inability to pay variation margin calls on its outstanding copper futures positions was the catalyst for the insolvency of Northern China-based copper smelter Yantai Penghui Copper Industry at the end of December.

Yantai had built up large long positions in copper futures, but was caught out by a sudden reversal in the commodity's price at the start of December and was unable to meet its subsequent margin calls. Banks have slashed their financing of China commodity firms following large