Copper ETPs will skew supply, demand - Luvata poll
miningweekly.com
By: Reuters
9th December 2010
LONDON - Physically backed copper exchange traded products (ETPs) will distort market fundamentals and prices, a survey carried out by international copper products maker Luvata showed.
The poll carried out on Luvata's website over the last few weeks showed a majority, 52 percent of more than 250 customers, prospective customers and industrial organisations said copper ETPs "will skew supply and demand and increase volatility".
"We're in a period in which availability is challenged. Anything that ties up physical metal and restricts end users from using copper is unhealthy," said Ian Scarlett, Luvata's head of metals, Europe and Asia.
"We believe this will lead to increased price volatility which is very bad news for the industry indeed."
Several industrial metal ETPS are being planned. The first will be from UK-based ETF Securities.
ETF Securities said earlier this week it would launch the first physically backed exchange-traded products (ETP) for copper, tin and nickel on Friday in London.
Investors can trade them as if they were shares with daily liquidity rather than investing in funds or commodity-index products which mostly use futures and lock up capital for long periods of times -- often years.
Many consumers are worried the ETPs, mostly aimed at institutional investors looking for exposure to hard assets and protection against inflation will leave them short of the material used mostly in power and construction.
Falling ore grades, disruptions and project delays mean that supply will, possibly starting this year, fall short of demand estimated at about 19 million tonnes this year.
"Copper is involved in every aspect of our lives and it's essential for the technologies that are driving a better, less wasteful future," said Justin Roux, Luvata's senior vice president of communications.
"If you were to ask me if a tonne of copper was better employed as a hospital MRI scanner or as a financial instrument, I wouldn't take long to answer."
Eighteen percent of respondents in Luvata's survey said the ETPs will "tie up valuable material", 27 percent said "they will bring healthy new dynamics" to the market and 3 percent said "they will have no significant effect on the value chain". |
