Thursday, December 27, 2012

Copper ETP Market Review

By Tim Dulaney, PhD and Tim Husson, PhD

Last week we described how a physical copper ETF might lead to a copper shortage and disruption of world commodities markets.  This week we wanted to review the copper ETP market in a bit more detail to get an idea of what is currently being offered.

There are seven US ETPs available with exposure primarily to the copper market.  These include:
All told, these ETPs have amassed a measly $200 million in assets since their respective inception dates.  However, as we pointed out last week, the new ETF proposed by JP Morgan will be different in that it will own physical copper.  Currently existing funds hold either copper futures contracts (JJC, CPER, CUPM, LCPR, SCPR) or shares of copper industry companies (CU, COPX) -- therefore, they are only indirectly linked to the value of physical copper.

It's not clear how much interest there will be in a physical copper ETP, but it is clear that so far equity-like exposure to copper hasn't garnered especially significant investor interest.  For comparison, the largest natural gas ETP is UNG, with over $1.1 billion in assets, and the largest silver ETP is SLV with over $10.7 billion in assets.  So if a new copper ETF is really going to create a shortage in world copper markets, it will likely have to prove much more popular than any other copper ETP to date.

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