Getting Physical with Copper, Industrial Metal ETFs

May 3rd at 9:23am by Tom Lydon

Copper demand is set to exceed supply, for the third year in a row, based upon large demand from China. If a physically-backed copper exchange traded fund launches in 2012,the global shortage of 240,000 metric tons could grow.

Physically-backed ETFs exist for many precious metals such as gold, silver platinum and palladium. Copper will be the first industrial metal to have a physically backed ETF in the U.S., reports Rosalyn Retkwa for Institutional Investor. [Commodity ETF Assets Hit a Record]

Providers, in turn, are gearing up to offer a physically-backed copper ETF, rather than one that tracks futures contracts. JP Morgan has filed to launch a physical copper ETF. [JP Morgan Readies First Physical Copper ETF]

“This is a big move,” Abraham Bailin, Morningstar ETF analyst said. “It’s not just another frivolous, ‘me too’ type of product. For the first time in the U.S. market, investors are going to be able to get exposure to physical copper, and that’s a ground-breaking thing,” he says, noting that it won’t be just accredited investors, but “Joe Six-Pack” as well.

BlackRock ,the world’s largest ETF provider by assets, has also filed for a similar product. The provider filed in September of 2011, and there has not been a release of any further information. Perhaps most interestingly, ETF Securities, based in London, has filed with the SEC for a full suite of seven physical industrial metal ETFs in the U.S., including not just copper, but also aluminum, nickel, tin, lead, and zinc and a basket of all six, reports Retkwa.

Out of all the industrial metals, copper is the one that “most people focus on in connection with global GDP,” John Hyland, chief investment officer at United States Commodity Funds said. “If I told you that China’s GDP numbers had surprised on the upside, the Chinese might need lead for batteries, but most people trade copper,” he says. [Copper ETF Decline Signals Global Growth Jitters]

Copper ETPs currently trading:

  • iPath Dow Jones UBS Copper Subindex Total Return ETN (NYSEArca: JJC)
  • First Trust ISE Global Copper Index Fund (NYSEArca:CU)
  • Global X Copper Mines (NYSEArca: COPX)

iPath Dow Jones UBS Copper Subindex Total Return ETN

Tisha Guerrero contributed to this article.

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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