In the copper fund, the country allocations are Canada, 42%; Great Britain, 22%; Peru, 9.3%; Australia, 7%. There are also holdings in Russia, Turkey and other areas. If you’re surprised that Chile isn’t on the list, there’s a reason for that. Abssy acknowledges that while Chile is a major copper producer, many of the names already held in the underlying index already have major properties in Chile. Also, many of the major Chilean miners are still privately held. [The Impact of Chile’s Earthquake.]
“There are many cross-deals in the mining industry,” Abssy says. “You wouldn’t necessarily think that a tiny company is connected to a large one, but the industry is like a big extended family.”
The platinum country breakdown is South Africa, 29%; Canada, 25%, Great Britain 17%. Other countries appearing in smaller amounts include Australia, Russia and a few U.S. names.
The outlook for both the platinum and copper markets looks to be on the bullish side of things as the domestic and global economies recover even further:
- Auto demand might be tepid now, but it’s showing signs of reviving.
- Ryan Issakainen, an ETF strategist at First Trust, also points out that when you combine the rate of cars being scrapped to the rate of population growth, it’s potentially a formula for an increase in auto sales and production in the United States alone. Auto demand in emerging markets is also becoming more robust.
- There are also tightening emissions standards; platinum and palladium are key components of catalytic converters, and can’t be substituted with any other metal.
- There are trace amounts of platinum group metals (PGMs) found in smoke detectors, airbags, computer hard drives and they’re heavily used in the pharmaceutical and cancer research industries, as well.
- On the copper side, a Barclays study recently projected that by the end of 2015, 1.5 billion Chinese citizens would each be using 12 pounds of copper – “astronomical when you think about the relatively tight supplies of copper,” Issakainen says.
- Copper is also a major component in new buildings – it’s heavily used in wiring and pipes, two things any modern buildings can’t get by without. “Copper is used very heavily in the emerging markets buildup,” says Issakainen.
Both funds have an expense ratio of 0.70%.
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