From FT Alphaville:

Red Kite Management, a $1bn metals-trading hedge fund, has suffered losses of up to 15 per cent so far this year… The news sparked heavy falls on the metals markets…

The report had a marked impact in the metals markets on Friday afternoon. In trading on the London Metal Exchange the price of copper fell 6 per cent, while aluminium was down 3 per cent and zinc slumped more than 8 per cent. ?Fund liquidation?a lot of stops triggered?a lot of the stuff on the back of the Red Kite news,? another trader told Reuters.

While a 15 to 20% loss doesn’t seem so bad, the fact that it has occurred in the last 5 weeks may be a harbinger of more trouble…

If we remember how the Amaranth thing unfolded, we could be in for some volatility in the metals markets if/while this thing shakes out… For an example of what could happen, take a look at Natural Gas’s prices last year:

natgas-amaranth.jpg

Amaranth got into trouble early in September and the October futures for Natural Gas never recovered…? (The jump up in the chart is when the November futures became the front-month contract.)

I seriously doubt we have another Amaranth on our hands, but the memory of its carnage and market impact is fresh and could create a little panic, and a lot of volatility, in the industrial metals over the next few days or weeks…