NEW YORK There is no
evidence that copper end-users "will not be able to obtain
their desired brands of copper at their desired locations" as a
result of a physical copper exchange-traded fund (ETF),
according to the Securities and Exchange Commission (SEC).
"Copper will remain available to
consumers and other participants in the physical copper
market," the SEC said in a filing responding to Southwire
Co.s claims that the agency ignored warnings over the
impact of the ETF on lengthy London Metal Exchange warehouse
The Carrollton, Ga.-based copper
fabricator had complained to the SEC that it failed to consider
evidence that a JPMorgan Chase & Co.-backed copper ETF
would create a bidding war for copper among warehouses and
consumers, according to documents filed in March in the U.S.
Court of Appeals in Washington (
amm.com, March 26).
Warehouses have been offering
high incentives to traders to entice them to store material,
while copper stocks in global warehouses have increased
steadily this year as a result.
Copper inventories in Antwerp,
Belgium, soared to 123,600 tonnes on April 8 from 44,875 tonnes
at the beginning of the year, with canceled stocks at 39,375
tonnes on April 8. Similarly, stocks in New Orleans have jumped
to 172,600 tonnes from 75,775 tonnes in the same comparison.
Canceled tonnage in New Orleans stood at 45,000 tonnes April
Southwire said that, as a
result, there is a crimp in supply, which is in turn pushing
According to the SEC, copper is
transferred to a participants book-entry account within
three business days, at which point "the redeeming authorized
participant taking delivery of copper from an LME warehouse
would then have to wait in the queues just like other owners
withdrawing metal from the warehouse."
Therefore, "waiting up to an
extra three business days beyond the time required to take
copper off of LME warrant is not a significant enough delay to
consider the copper delivered ... unavailable for immediate
delivery," the SEC said.
The SEC noted that copper also
can be stored in non-LME-listed warehouses, which do not have
The SEC said that as it is
unknown how much copper would be shipped to warehouse locations
and how quickly, it cannot conclude that queues would in fact
JPMorgan previously argued that
any copper taken out of LME warehouses for the ETF would not
disrupt copper supplies as it will remain readily available for
consumers and participants. The ETF will start small, backed by
less than 10,000 tones, and eventually reach an estimated
61,800 tonnes, although JPMorgan could increase this if the
product is successful.
AMMs spot copper
cathode premiums are 4.5 to 5.5 cents per pound, although both
consumers and traders said evidence points to an upcoming
amm.com, April 2).