Copper ETFs Rise on Improving Fundamentals | ETF Trends

Copper-related exchange traded funds climbed Wednesday, with copper prices breaking above $3 per pound for the first time in over two years, on improving Chinese demand and problems in the global supply chain.

On Wednesday, the United States Copper Index Fund (NYSEARCA: CPER) was up 0.2% and iPath Series B Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJC) was 1.0% higher. Additionally, the Global X Copper Miners ETF (NYSEARCA: COPX), which takes a more focused approach to copper miners, increased 1.8%.

Meanwhile, Comex copper futures gained 0.6% to $3.009 per pound, crossing above the closely watched $3 level for the first time since June 2018. Copper prices have jumped about 25% in the past three months and is one of the best performing major assets over the period.

Many analysts argue that $3 copper incentivizes miners to pursue longer-term projects to extract the metal, the Wall Street Journal reports. Diminished investments in new mines due to low prices in recent years is one bullish factor for outlook of the industrial metal, which is used to manufacture everything from smartphones to homes.

Prices are closely tied to demand in China, which accounts for about half of global copper consumption. Chinese demand plunged early in the year when the coronavirus caused widespread shutdown measures, but they have rebounded since with manufacturing activity in China accelerating.

“Metals demand seems to be doing better given the rebound in global manufacturing,” Edward Meir, a consultant focused on metals at brokerage ED&F Man Capital Markets, said in a note.

On the supply side, mining giant Rio Tinto said a smelter at a mine in Utah is having issues following maintenance. The smelter is expected to be functional in two months, but it has cut its 2020 estimate for copper output production as a result of the shutdown. Furthermore, countries around the world, like Chile, are also facing disruptions due to the Covid-19 pandemic and labor disputes.

For more information on the commodities market, visit our commodity ETFs category.