JPMorgan Wins Approval for First U.S. Physical Copper ETF

JPMorgan Chase & Co. (JPM) won regulatory approval for the first U.S. exchange-traded fund backed by physical copper, which some industrial users said may disrupt the market.

The proposed rule change by NYSE Arca Inc. to list JPM XF Physical Copper Trust was approved, the regulator said in an order on its website dated Dec. 14. BlackRock Inc. (BLK) and ETF Securities Ltd. also have said they plan to start physically backed ETFs for industrial metals in the U.S.

A group of industrial copper consumers including AmRod Corp., Southwire Co. and Encore Wire Corp. (WIRE) and hedge fund RK Capital LLP opposed the plan, saying funds backed by copper would leave less of the metal available for manufacturers, creating shortages and driving up prices. Senator Carl Levin, a Michigan Democrat who in July had advised rejecting the ETF, said in a statement today that the approval is “a blow to American businesses and consumers that rely on copper,” and that Congress should review the move.

A study released last month by an SEC division concluded that asset flows from exchange-traded products tied to metals don’t have a significant impact on the price of the commodity. Those findings were disputed by the copper-users group.

Patrick Burton, a London-based spokesman for JPMorgan, declined to comment on when the firm plans to introduce the fund.

ETFs trade like stocks, giving investors access to commodities such as copper without taking physical delivery. ETF Securities started the first exchange-traded products backed by copper, nickel and tin in London in December 2010. Company data shows that the copper fund holds about 2,000 metric tons of the metal, compared with more than 20 million tons that the International Copper Study Group said will be mined and used this year.

Surplus Metal

Copper will have its first production surplus in four years, with output set to top demand by 458,000 tons next year, the ICSG said Oct. 10.

Inventories of the metal in warehouses tracked by the London Metal Exchange, down 19 percent this year, climbed 9.5 percent in a day to 298,625 tons, the most since Sept. 5, 2008, exchange data showed today. Inventories tracked by the Shanghai Futures Exchange advanced for a second week, rising 7,406 tons to 205,385 tons, data from the bourse showed Dec. 14.

NYSE Arca Inc., the electronic platform of NYSE Euronext, filed with the SEC to list and trade JPM XF Physical Copper Trust, according to an April 2 document. It sought approval to list BlackRock’s iShares Copper Trust on June 19.

Through Dec. 14, copper for delivery in three months climbed 6.1 percent to $8,065 a ton on the LME this year.

To contact the reporters on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net