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Copper ETFs in Focus on Rising Demand

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Copper prices rallied to a near four-year high on Dec 27, 2017, driven by strong demand from the world’s largest consumer and robust global economic growth.


Factors Driving Copper Prices


Increased Demand


China is the biggest consumer of copper, accounting for around 40% of global demand for the metal. Chinese imports of the metal jumped higher in November, driving copper prices higher. Imports of refined copper increased 19% year over year in November to 329,168 tonnes.


Owing to the Chinese government’s crackdown on pollution, state run Jiangxi Copper was asked to cut production.  Reports of Jiangxi Copper stopping production also supported copper prices. Prices hit $7,259 a tonne on Wednesday.


Moreover, requirements for charging stations to support the higher attention grabbed by electric cars in the future are expected to drive demand for copper higher.     


Global Economic Scenario


Strong global economic growth is driving demand for the red metal. Per a PwC analysis, global economic growth is expected to hit 3.7% in purchasing power parity terms in 2018. Moreover, global economic activity seems to be picking up as the International Monetary Fund (IMF) estimates 3.6% and 3.7% growth in 2017 and 2018, respectively, compared with 3.2% in 2016.  


Copper is widely used in construction as well as manufacturing activities. Therefore, strong price trends for copper supports market sentiments of robust economic growth. “The rally in copper supports expectations that 2018 is going to be a strong year for synchronized global growth,” Greg McKenna, chief strategist at AxiTrader, said to Financial Express.


Let us now discuss a few ETFs focused on providing exposure to copper (see all Industrial Metal ETFs here).


iPath Dow Jones-UBS Copper ETN


This fund offers exposure to one of the most widely used industrial metals. It seeks to deliver the returns of copper and tracks the Dow Jones-UBS Copper Subindex Total Return index. The index provides returns available through unleveraged investments in futures contracts on the metal.


It has AUM of $69.8 million and charges a fee of 75 basis points a year. JJC trades in an approximate volume of 51,000 shares. It has returned 29.8% year to date and 31.5% in a year (as of Dec 27, 2017).


Global X Copper Miners ETF (COPX - Free Report)


This ETF seeks to provide exposure to copper mining companies and can be used as a means to attain portfolio diversification through equity exposure to the metal. It tracks the Solactive Global Copper Miners Index.


It has AUM of $66.6 million and charges a fee of 65 basis points a year. COPX trades in an approximate volume of 54,000 shares. It has returned 36.9% year to date and 35.4% in a year (as of Dec 27, 2017).


United States Copper Index Fund (CPER - Free Report)


This fund aims to track the performance of copper by tracking the return of Summer Haven Copper Total Return index.


It has AUM of $10.5 million and charges a fee of 80 basis points a year. The fund’s has high exposure to Freeport-Mcmoran Inc, Teck Resources Ltd-Class B and First Quantum Minerals LT, with 5.9%, 5.4% and 5.3% exposure, respectively (as of Dec 26, 2017). It has returned 28.1% year to date and 28.7% in a year (as of Dec 27, 2017).


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