NEW YORK Financial
instruments such as physical copper exchange-traded funds
(ETFs) will "wreak havoc" on the market, distorting prices and
increasing volatility, according to a senior executive at one
of the worlds largest consumers of the metal.
Bob Kickham, a senior vice
president at London-based Luvata UK Ltd., told AMM
that the company has a "fundamental objection" to physical
copper ETFs and similar financial instruments, a view it has
taken to the U.S. Securities and Exchange Commission (SEC) as
it considers whether to approve their launch.
"The world needs metal to be
available to end-users to make useful goods and services, not
tied up in investment vehicles or complex, inflexible systems,"
Kickham said. "We dont understand the need for ETFs and
believe they will distort the market. We dont like the
effect they will have on taking industrial material out of the
market, and we believe they will bring unnecessary volatility,
which makes it very difficult for consumers to plan."
Luvata is one of a group of
consumers lobbying the SEC against proposals by New York-based
JPMorgan Chase & Co. and BlackRock Inc. to launch separate
physical copper ETFs.
The other members of the
consortium are consumers Southwire Co. Inc., Carrollton, Ga.;
Encore Wire Corp., McKinney, Texas; and Newark, N.J.-based
AmRod Corp.; as well as London-based hedge fund RK Capital
Management LLP, which focuses on metals.
"Were more worried about
the medium- and long-term effects, not the short-term impact of
financial instruments like ETFs," Kickham said. "Securities
like this will come and go and wreak havoc on the copper market
until theyre banned, and then someone will think of
another financial instrument that will replace them."
In what was seen as a blow to
copper market participants opposed to the launch of physically
backed ETFs, the SEC last month said that there was no strong
correlation between copper inventories and prices (
amm.com, Nov. 9).
A decision by the SEC on
proposed ETFs is imminent.