News & Events - Ebullio Capital Management LLP

Article: Bloomberg

Copper Rebounds in London on Speculation About Chinese Buying

By Claudia Carpenter

-- Copper rose from a two-week low in London on speculation China, the world's largest consumer of the metal, is stepping up purchases. Aluminium dropped to the lowest price in six years.

Copper inventories in London Metal Exchange-monitored warehouses declined 1,125 metric tons, the most since Oct. 21. A tripling of stockpiles contributed to copper's 60 percent slide in the past year. Today's drop took place as metal was taken from South Korean and Singapore warehouses that are closest to China.

"It's going to China," said Lars Steffensen, managing director of Southend-on-Sea, England-based Ebullio Capital Management LLP, which has 3.6 percent of its $25 million invested in copper futures. "This drop today is probably a good indication that we're getting to a flattening of the relentless trend of more stock coming in."

Copper for three-month delivery rose $34.50, or 1.1 percent, to $3,219.50 a metric ton at 10:28 a.m. local time on the LME. It erased a drop as far as $3,165 a ton, the lowest since Feb. 2.

Open interest in the metal on the LME has increased 1.5 percent this year, signalling investor demand for copper, used in plumbing and electrical wiring, as prices have risen 4.5 percent.

"We're betting that supply isn't going to be able to keep up with the growth that we envision in consumption," Steffensen said, adding that Ebullio has been buying copper since December. While prices may fall a further $1,000, there's scope for a gain of $6,000, he said.

Aluminium dropped $14, or 1.1 percent, to $1,316 a ton, the lowest since Oct. 14, 2002. U.S. and Canadian demand for the metal fell 16 percent from a year earlier in December and slid

8.1 percent for all of 2008, the Aluminium Association Inc. said.

Zinc fell $5 to $1,105 a ton, and tin declined $50 to $10,750 a ton. Nickel dropped $149 to $9,751 a ton, while lead lost $22 to $1,087 a ton.

Article: TheBullionDesk.com

Commodities to benefit from reflation, tin to win and gold to reach new record high

By: Melanie Burton

The commodity sector will benefit from reflation as governments print currency to shore up their faltering economies, with tin to win and the gold bubble to breach a new record high before it bursts, a leading commodity trade hedge fund manager told TheBullionDesk.com.

As large scale printing debases currencies world wide and the dollar goes into free fall, hard assets such as commodities and ironically, real-estate, will be the best means to hold value, manager of Ebullio Commodity Fund Lars Steffensen told TheBullionDesk.com.

"The reflation trade is going to be commodities. Not just gold, but anything that is tangible, because there is a serious danger that the American dollar is going to suffer very badly," he said.

"Even if we have another three years of recession, (commodity markets are) still going to be very tradable -- it's a very volatile space to be in and as long as the prices move, there will be money to be made for funds like ourselves," he added.

Ebullio Commodity Fund returned a whopping 133.64 percent last year and over nine percent in December -- a time when the global credit crunch was wiping many hedge funds off the map. The fund, which trades on supply and demand pictures, currently manages around $25 million via futures, options and the physical market. It launched at the beginning of 2008.

"The dollar is getting weaker. The first thing that people buy (to retain value) before the other commodities will be gold," Steffensen said.

Gold is one of around 40 markets Ebullio monitors, watching for "once in a lifetime" trades across five commodity sectors -- it also watches base metals, energy, agriculture, softs and livestock. As of last week, roughly 70 percent of the fund's exposure was to metals and 30 percent to softs.

As the dollar collapses in the third quarter, gold will be catapulted above $1,200 an ounce, expects Steffensen -- following which investors will stampede toward exits and gold will plummet down to $800 an ounce. Since printing a new record high of $1,032.60 an ounce March 17, 2008, gold for cash delivery plummeted below $700 in late October, but has since steadily climbed higher to $925 an ounce Wednesday.

"What we’re seeing now is unprecedented -- the scale is unprecedented but the way things have moved -- we’ve seen that before," said Steffensen, who has traded commodities for over 22 years, with 40 percent average returns annually since 1987.

"We basically look for prices that are either too high or prices that are too low. We look for prices to be reached with heavy volume -- capitulation highs and capitulation lows, and then we get in," he added.

The fund's tight risk policy has helped insure it from the fate of other hedge funds -- only 25 percent of its assets are allocated at a time with strict stop-loss points to ensure that no more than 2.5 percent of the total asset allocation is exposed. Options are also bought to hedge against severe adverse market reaction.

TIN, COPPER OUTLOOK BRIGHT, ALUMINIUM GLOOMY

With the world, excluding China, reliant on stuttering Indonesian production for tin supply and changes to European Union legislation set to ramp up demand, tin has the brightest outlook of the LME metals. The ban of lead in solder, a tin-lead mix used in electronics and in cans -- has led to a surge in demand, said Steffensen.

As well, global inventories remain low with producers having destocked for cash to plump up end-of-the-year balance sheets. Under 9,000 tonnes, LME inventories make up less than 10 days' worth of global demand -- by far the least of any LME metal.

In contrast, dwindling demand for aluminium due to the global economic downturn has led visible LME stocks to soar -- which is likely to depress prices below $2,000 for the next few years. This follows the precedent set during the fall of the Soviet Union in the early 1990s when a lot of aluminium stock found its way into LME storehouses in order to get financing, Steffensen said.

"You could basically not turn around anywhere in Rotterdam without seeing piles and piles of aluminium -- they got special dispensation to store it outside. It was everywhere," he said. "It probably took us 7-8 years to run it down and now we’re getting it all over again."

So far, LME stocks have surged to record highs above 2.9 million tonnes -- forcing aluminium prices to five-year lows last month near $1,316 a tonne -- it was recently quoted at $1,406 a tonne on the London Metal Exchange. Steffensen estimates another 2-3 million tonnes could be yet to come.

"A lot of auminium has been tied up in long term financing contracts, (which) would be revolving but a lot haven't been renewed. Again it depends on the credit crunch and the banks, but a lot of that metal has now flooded on to the market. It was always there but it was’t always visible," he said. "I think that visibility is weighing on the market."

Copper is a different story, with constrained production, declining ore grades and rampant demand from China likely to keep the market in tigher balance.

"If you see copper below $2,800 a tonne ...you should fill your boots because it’s going to be the last time it will have a '2' in front of it for a long time -- until it hits $20,000," Steffensen said. "It will take a long time but it will happen -- there's just not enough copper in the world."

Another successful trade is the zinc/lead switch, where hedge funds who have taken a shine to lead distort the historical ratio --where zinc costs twice lead's price per tonne.

"The reason for that is not fundamentals, it’s just that some very big hedge funds out there have fallen in love with lead, they trade that and not really zinc, so when they come to buy it, they whack it out of skew," Steffensen said.

Ebullio Commodity Fund opened to investors last October, and will launch The Ebullio Power & Emissions Fund this quarter.

Article: TheBullionDesk.com

London bullion market should align with LME

By: Melanie Burton

The London bullion market can help shore up London's capacity as a key financial centre which has been shaken by numerous banking sector collapses, by aligning with the London Metal Exchange (LME), a leading commodity hedge fund manager said.

"There’s going to be consolidation in the futures industry and it will make London stronger as a financial centre if (metals market processes) stay a British entity," said Lars Steffensen of commodity hedge fund Ebullio which returned over 130 percent last year.

The London Bullion Market Association (LBMA) is currently looking at ways to mitigate credit risk, such as introducing clearing for gold and silver over-the-counter forward transactions. The credit crisis has increased the risk of default and the level of counterparty risk LBMA members have had to take on in recent months, since the collapse of Lehman Brothers last September intensified the credit crisis.

So far, LBMA members have been presented with three options -- US-based CME Group, European NYSE Euronext and London-based clearing house LCH.Clearnet -- and the LME has also offered its services.

"I think the LME should consolidate the London metals markets. I think the LME would be more ideally placed in terms of historical, but also...for synergy reasons to incorporate the LBMA because the LME understands the prompt date system," Steffensen told TheBullionDesk.com.

On the LME every day between spot and three months can be traded and forward contracts are only settled when they become prompt and expire. In contrast, monthly futures contracts, such as those found on NYSE Euronext and COMEX, are payable daily against a forward date -- this is said to encourage more speculation.

"Also the LME has a structure, they have the tradition, they have the electronic trading platform. You know, bullion would be ideal to put on Select (the LME's electronic trading system), so I think for all those reasons it would make more sense for the LBMA to...commit to an alliance," he said.

Ebullio, which trades gold futures via the US-based COMEX exchange would happily move its business to London if cleared futures or forward trading were available, Steffensen said.

"I think there’s a lot of volume that would go away from the NYMEX contract if the (London bullion market) was bought up by the LME."

Article: Reuters

Supply tightness drives cocoa higher

By: David Brough

LONDON, Dec 23 (Reuters) - London cocoa futures rallied on investment fund buying on Tuesday, while coffee slipped on hedge selling in holiday-thinned volume.

London benchmark May cocoa futures surged to a 23-year high, basis second month, on fund and investor buying, dealers said.

"The fundamentals (in cocoa) look good," said Lars Steffensen, managing director of London-based commodities fund Ebullio Capital Management.

Dealers and analysts saw a tightening global supply helping to underpin prices in the medium term.

November 2008

The Ebullio Commodity Fund was ranked 1st among commodity funds in the EuroHedge league table of year to date returns.

The Ebullio Commodity Fund also appeared in the Eurekahedge Global Hedgefund Top 10 for annualised returns in October.