It was a summer shoot-out between two of the biggest copper traders in the business -- investment bank Barclays Capital betting prices would rise and London hedge fund Red Kite expecting them to fall. Red Kite won, hands down.

The head of metals trade at Barclays Capital and a colleague were leaving the company on Thursday after losing tens of millions of dollars on London Metal Exchange (LME) copper, compounded by losses on aluminum futures, trading sources said.

They were named by dealers as Iain Macrae, head of the metals desk at Barclays, and Christian Saunders. Barclays would not confirm the identity of those departing. Neither could be reached for comment.

Barclays would not specify the scale of the losses but said they were not "big" and that there was no "abnormal" trade, a reference to rogue trading.

Traders said Macrae, said to be responsible for the biggest book on the LME, went long in copper in the summer betting that warehouse stocks would fall. He ordered long positions on outright copper prices, spreads and options.

Barclays in August had bought a stake in Erus Metals, a small metals warehouse in Europe, to help manage its trading position and to secure a foothold in the profitable storage business.

One large bet was on a widening spread of December 2012 copper over December 2013.

Macrae was up against the most renowned trading team in metals, Red Kite's Michael Farmer and David Lilley.

"Barcap got stung by Red Kite," a veteran LME trader said.

Known for its connections in China, Red Kite decided demand from the world's biggest copper consumer was suffering from a spike to $10,000 a tonne in copper earlier in the year. It shorted the market. Farmer and Lilley also ensured they had the metal to deliver against their short position in case they needed it.

"Farmer was a big short and made sure he had the copper to deliver in case he got squeezed. That's what eased the spread," said the trader.

At the same time, traders of risk assets on financial markets globally were rattled by growing concern about the euro zone debt crisis.

At the start of August LME copper was valued at $9,900 a tonne. By the end of September it had dropped a third to $6,635. Spreads collapsed too and options were out of the money.

"It was a triple whammy," said another dealer.

At that point, according to an investor who declined to be identified, Red Kite was up nearly 50 percent on the year. By the end of November it was up about 32 percent.

Barclays' research team has been bullish on copper this year. In a report released in mid-July it forecast copper would climb from $9,137 a tonne in the second quarter to $12,000 a tonne on average in the fourth quarter. The fourth quarter average to date is $7,530.

ALUMINIUM PLAY UNRAVELS

Compounding its losses, a Barclays trade on the February to March 2012 aluminum spread unraveled this week.

In September, traders said, it and others began building large long aluminum positions into early 2012.

The plan was to target rivals who have long-term financing deals on aluminum and store it in warehouses. Warehouse owning metals dealers commonly hedge their positions by taking short positions on the LME.

Traders said Barclays helped bid the February 2012 contract for aluminum up to a premium against March. It dropped to a steep discount this week and Barclays was forced to liquidate the position.

The February-March spread traded as high as a $9-a-tonne premium on Dec. 5 and closed on Dec. 21 at a discount of $11.50 a tonne.

"We knew they were liquidating their nasty position," said another LME metals trader.

Barclays shut its proprietary trading arm this year as it streamlined operations and pared back in areas under most regulatory pressure, alongside the exit of star commodities trader Todd Edgar and several colleagues.