WSJ piece (on copper) mentions current SPDR Gold Shares holdings of gold (40.3 million troy ounces) ...........
(Apparently -- not much different than the amount held back in August of 2011*****)
***** see the message I am replying to ... for info. on Aug. 2011 holdings.
Jon.
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March 5, 2013
COMMODITIES
Copper Market Prepares for a Flood
Price of the Industrial Metal Has Plunged Amid Forecasts of the Biggest Increase in Output in 13 Years
By TATYANA SHUMSKY
The copper market is bracing for a wave of new mine openings this year.
Copper prices recently fell to three-month lows as investors and traders anticipate an onslaught of supplies, estimated to be the biggest increase in global copper mine output in 13 years.
At the same time, the outlook for growth in copper demand remains dim: The No. 2 and No. 3 users of the industrial metal, Europe and the U.S., continue to face economic headwinds. Copper demand is highly correlated with manufacturing activity because it is used in many goods, from electronics to automobiles to home appliances.
The health of the world's copper supplies now is coming under particular scrutiny. J.P. Morgan Chase JPM +0.79% & Co. and BlackRock Inc. have received regulatory approval to launch exchange-traded funds backed by physical copper. Southwire Co., the largest industrial user of copper in the U.S., has mounted a legal challenge to the rollout of J.P. Morgan's ETF, saying the fund could lock up supplies and drive prices higher. Southwire declined to comment.
Many investors say that, for now, these fears are unfounded.
"Everyone is expecting a surplus" of copper due to an increase in mine production, says Bill O'Neill, a principal at a commodities advisory and trading firm Logic Advisors in Upper Saddle River, N.J. "A few months ago, everyone was expecting a deficit."
Mr. O'Neill recently got out of his bullish bets on copper.
On Friday, copper prices settled at their lowest level since Nov. 16, and are down 4.3% year to date. On Tuesday, copper for March delivery rose 0.4%, or 1.35 cents, to settle at $3.4965 a pound.
Hedge funds and other money managers are piling on bets on copper prices falling further. Bearish bets on the futures and options markets outnumber bullish ones by 7,172 contracts valued at $639.5 million, according to the latest data from the U.S. Commodity Futures Trading Commission. This is a sharp reversal from Feb. 19, when most speculative investors were bullish.
Mining companies started developing new copper mines more than a decade ago when global demand was rising at a red-hot pace. Many of those mines, in Mongolia and Chile and Zambia, are preparing to extract their first copper in the coming months. Together, these mines will add 1.9 million metric tons, or 11%, to the market, according to Credit Suisse. Global copper output will reach 20.5 million tons by 2015, Credit Suisse predicts.
Rio Tinto PLC says Oyu Tolgoi in Mongolia, the largest copper discovery in more than a decade, will reach annualized production levels of 425,000 metric tons of copper by the end of June.
Analysts are forecasting copper supply to exceed demand by about 153,000 metric tons this year, according to a survey by CPM Group, a New York commodities research firm.
"If you're going to trade copper on fundamentals, it's probably significantly overpriced," says Steve Matthews, chief investment officer of New York hedge fund Flintlock Capital Asset Management. Mr. Matthews has placed bets that would profit from falling prices.
Mr. Matthews says the copper market will be oversupplied because global growth is likely to continue at a tepid pace. The U.S. economy showed a meager expansion of 0.1% last quarter. Much of Europe is in recession.
Other investors say they doubt the new mines will be able to deliver all the copper expected. "Copper is hard stuff to find," says Jean-Marc Bonnefous, chief investment officer at commodities hedge fund Tellurian Capital Management in London. "The plans today are not the reality tomorrow."
Mr. Bonnefous is taking advantage of the recent slide in prices to place bullish bets on copper. In recent weeks, he has taken long positions in the futures market and expects prices to hit $3.85 a pound in the second quarter.
Still, copper consumers and investors have to grapple with what, if any, effect the copper ETFs will have on supplies.
Some investors say copper ETFs could significantly reduce supplies if they are able to replicate the success of physical-gold funds, such as SPDR Gold Shares.
SPDR Gold Shares held 40.3 million troy ounces, or 1,253.88 metric tons, of gold as of Friday. That represents 33% of 2012 global demand for gold, according to TD Securities.
But the bears say copper is less popular with investors than gold, so a copper ETF won't make as big of a dent in supplies of the metal. The only copper-backed ETF currently in existence, the two-year-old ETF Securities Physical Copper fund in London, held 6,768 metric tons of the metal as of Friday. That is 0.03% of 2012 global demand for copper, according to TD Securities.
"Whatever copper goes into the ETFs is going to come back out," said Flintlock Capital's Mr. Matthews.
Matt Day contributed to this article.
Write to Tatyana Shumsky at tatyana.shumsky@dowjones.com
Copyright © 2013 Dow Jones & Company, Inc.
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