NEW YORK In a potential
blow to copper market participants opposed to the launch of
physically backed exchange-traded funds (ETFs), the U.S.
Securities and Exchange Commission (SEC) has said there is no
strong correlation between copper inventories and prices.
Fund flows into ETFs dont
lead to changes in underlying metals prices, the regulatory
agency said. It also found "no evidence" of a relationship
between the effects of changes in the supply of copper on
market prices, nor is there a correlation between London Metal
Exchange settlement prices and the amount of copper on LME
warrant, it said.
"The staffs analysis found
that the statistical relations between the flow of assets to
other commodity-based ETPs (exchange-traded products) and the
price of the commodities underlying those ETPs are not strong,"
it said. "The analysis also found no evidence of a statistical
relationship between LME inventory levels and LME settlement
prices for copper."
The SEC is scheduled to rule on
the planned physical copper ETFs, proposed by subsidiaries of
New York-based JPMorgan Chase & Co. and BlackRock Inc., on
The SEC has received opposition
to the products from such copper companies as Carrollton,
Ga.-based Southwire Co. Inc.; Encore Wire Corp., McKinney,
Texas; London-based Luvata UK Ltd.; and AmRod Corp., Newark,
N.J.; along with London-based metals-focused hedge fund RK
Capital Management LLP.
They argue that the new products
would create a supply disruption that would hurt their
businesses and the markets they serve, and would have an
adverse effect on the countrys economic recovery.
Hamburg, Germany-based copper
producer Aurubis AG also recently said that if physically
backed ETFs on the market are successful, metal would have to
be removed from the market at a time of a worsening supply
The ETFs studied were for
silver, gold, platinum, palladium and copper, namely the
iShares Silver Trust, SPDR Gold Trust, ETFS Platinum Trust,
ETFS Physical Palladium Shares, and U.K.-listed ETFS Physical
"These five ETFs were chosen
because they were the first physical ETFs to be listed in their
respective markets and have since become the largest in terms
of assets under management," the SEC said.
The SEC study was completed by
economists at its division of risk, strategy and financial