Coming Soon: A Futures-Based Copper ETF?

November 19th at 1:00am by Tom Lydon

The index provider behind a broad commodity exchange traded fund (ETF) has recently launched a copper index that could seen be followed by an ETF.

United States Commodity Funds, the ETF provider behind such popular ETFs as the United States Oil Fund (NYSEArca: USO) and United States Commodity Index (NYSEArca: USCI), has licensed from SummerHaven an index of copper futures contracts with maturities of 18 months or less, reports Cinthia Murphy for Index Universe.

At the moment, there’s no futures-based copper ETF. If one were to launch, it would come at a time of fast-rising popularity for the base metal. The index will seek to mitigate the negative effects of contango in the market, a recent concern about commodity ETFs that own futures.

Copper has been driven in recent months by a variety of factors:

  • A Chilean strike. Chile is the world’s largest copper producer, so any interruption have the potential to be keenly felt by the markets. Copper rose to a 28-month high in London even before workers at Collahuasi in Chile, the world’s fourth-largest copper mine, prepared for a “long” strike. Claudia Carpenter for BusinessWeek reports that this has the potential to disturb supplies.
  • Emerging market urbanization. China’s next phase of urbanization is fueling a huge demand for electricity which should, in turn, increase demand for copper. Don Miller for Money Morning reports that China is on track to triple its consumption of copper to 20 million tons by 2020. At that point, the country will account for 49% of world copper sales. [More Copper Investing Opportunities With ETFs.]
  • Bullish forecasts. Predictions are out that say the metal could rise by 50% to $12,000 a metric ton in the next six to 12 months. That’s got investors around the world looking for ways to get exposure.
  • The Federal Reserve’s quantitative easing plan is also fueling demand for the metal. It’s believed by investors that the program could fuel an increase in construction, which would lead to more use of copper in pipes and wiring, says the International Business Times.

For the time being, you can get exposure to copper miners via First Trust ISE Global Copper (NASDAQ: CU), Global X Copper Miners (NYSEArca: COPX) or iShares MSCI Chile (NYSEArca: ECH).

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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