Industrial metals have been laggards in the already downtrodden commodities space for over a year, a theme that has been on display again in 2015.
Through the first three months of the year, six of the 10 worst non-leveraged exchange traded products were commodities ETNs with the iPath Dow Jones-UBS Nickel Total Return Sub-Index ETN (NYSEArca: JJN) ranking as the fourth-worst non-leveraged ETF over that period.
Believe it or not, some analysts are bullish on copper, indicating the iPath Bloomberg Subindex Total Return ETN (NYSEArca: JJC), which is down just 2.9% this year, could turn around. Over the past month, JJC is up nearly 4%. [Copper ETF Tries to get Healthy]
The second quarter could prove pivotal for JJC’s fortunes.
“From this analysis, we have produced our outlook on prices for 2015 and 2016. We expect copper prices to rise in Q2 to $6,300/t as demand returns. In Q3, we expect them to continue to rise to $6,600/t, before easing in Q4 to $6,500/t. We expect an annual price of $6,313/t in 2015 and $6,250/t in 2016. We base our analysis on historical price movements, the projected supply and demand balance, and our qualitative judgment of market conditions. At the core of our approach is the thesis that over the medium term, fundamentals drive metals prices; because we believe the fundamentals of the copper market show a tight market, we remain bullish for the year,” said Barclays in a note posted Wednesday by Johanna Bennett of Barron’s.
While copper futures and JJC have recently shown signs of life, copper equities have struggled. Over the past month, the First Trust ISE Global Copper Index Fund (NasdaqGM: CU) and the Global X Copper Miners ETF (NYSEArca: COPX) are off an average of 5.9%. Last month, Freeport-McMoRan (NYSE: FXC), the largest U.S.-based copper miner, slashed its quarterly dividend to 5 cents per share from 31.25 cents.
Barclays’ optimism on copper comes after some other banks sounded bearish tones on industrial metals. In late March, Morgan Stanley pared its price forecasts on all base metals, citing slack demand from China. Goldman Sachs also anticipates an equally unfavorable outlook for the commodities space, predicting a 20% decline in global raw-material prices over six months. [Trouble for Commodities ETFs]
iPath Bloomberg Copper Subindex Total Return ETN
ETF Trends editorial team 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.