ETF impact on copper queues key: consumers

Dec 11, 2012 | 09:45 AM | Andrea Hotter

Tags  ETF, copper, warehouse queues, LME, SEC, JPMorgan Chase, BlackRock, Southwire Luvata

NEW YORK — Copper consumers opposed to the launch of physical exchange-traded funds (ETFs) have called on the U.S. Securities and Exchange Commission (SEC) to investigate the queues at London Metal Exchange-registered warehouses, citing New Orleans as the "most alarming" example of why the market might suffer if the products are launched.

Metal backlogs at LME-listed warehouses are spreading due to lucrative incentives for metal to be put into storage, Robert Bernstein, a partner at New York law firm Eaton & Van Winkle LLP, said in a letter to the SEC.

"In addition to promoting a physical copper-backed ETF, which will create forced scarcity, owners of LME warehouses—including ETF sponsor JPMorgan Chase & Co.—now appear to be competing with end-users for available supply by paying producers with surplus metal huge financial incentives to deposit their metal in LME warehouses," Bernstein said, adding that these backlogs would be exacerbated by the launch of ETFs. He represents some of the biggest U.S. copper consumers, including Southwire Co., Encore Wire Corp., Luvata UK Ltd. and AmRod Corp., along with metals-focused hedge fund RK Capital Management LLC.....