NEW YORK U.S. copper fabricators Southwire Co. and Encore Wire
Corp. are appealing a decision by the U.S. Securities and
Exchange Commission (SEC) to allow a physical copper
exchange-traded fund (ETF) sponsored by JPMorgan Chase &
The two companies reiterated
their belief in a filing at the U.S. Court of Appeals in
Washington that the ETF would lead to an investor-financed
squeeze for London Metal Exchange-grade copper in the United
amm.com, Jan. 11).
The companies called the
SECs decision to allow the ETF "arbitrary and capricious,
an abuse of discretion, or otherwise not in accordance with the
law or unsupported by substantial evidence."
Southwire and Encore have been
part of a consortium lobbying the SEC through lawyer Robert
Bernstein, a partner at New York law firm Eaton & Van
Winkle LLP, against the launch of physical copper ETFs (
amm.com, May 24).
Fellow copper fabricators Luvata
UK Ltd. and AmRod Corp., along with metals-focused hedge fund
RK Capital Management LLC, had been part of that group but have
dropped out of the appeal, which is likely to be time-consuming
Their views have been echoed by
U.S. Sen. Carl Levin (D., Mich.), who has said that ETFs will
be used to speculate in copper (
amm.com, Dec. 20).
Levin described the SECs
approval of the JPMorgan ETF as "a blow to American businesses
and consumers that rely on copper for industrial machinery,
plumbing, transportation, electric power generation and
transmission, and electronics."
JPMorgan says that any copper
taken out of LME warehouses for the ETF will not disrupt copper
supplies because it will "remain available for immediate
delivery to consumers and participants in the physical
The bank plans to start small
and build up: The product will be backed by less than 10,000
tonnes of copper when it initially launches, JPMorgan
The JPMorgan ETF was approved in
December, but the SEC has delayed its decision on whether to
permit asset manager BlackRock Inc. to list and trade shares in
a physical copper ETF until Feb. 22 (
amm.com, Dec. 17).
BlackRock has described the
proposed ETF as a relatively liquid, low-cost and transparent
means to transact in physical copper.
It refutes the suggestion that
the product would remove copper from the market and distort
prices, estimating instead that as of July, total world
warrantable copper supply was 2.926 million tonnes. Of this,
1.358 million tonnes of liquid warrantable copper stocks are
available, BlackRock says.
The two ETFs are expected to
account for around 180,000 tonnes of copper.