The premium on copper for immediate delivery may rise in the first three months of 2011 if the U.S. allows exchange-traded funds backed by the metal, according to commodity-research firm CPM Group Inc.
“If the physically backed ETFs are approved in the first quarter, I would expect to see the premium rise as investors come into the metal that already has tight market conditions,” Catherine Virga, the director of research at CPM in New York, said today in a telephone interview. “In the long term, it won’t have a dramatic impact on prices.”
JPMorgan Chase & Co. and BlackRock Inc. said in October they are preparing to introduce copper ETFs, providing investors access to the metal in the form of an equity-like product. Global inventories of copper have slumped 20 percent since the end of June to the lowest level since November 2009.
In Shanghai, the fee buyers pay on top of the price set on the London Metal Exchange has dropped 46 percent since the end of September, Metal Bulletin data show. In Europe, the premium has lost 9.1 percent in the same period, and is unchanged in the U.S., according to the industry publication.
Demand for copper will “soften a bit” in the three months ended Dec. 31, because of seasonal slowodowns in construction and manufacturing, Virga said. Purchases will “pick up going into the first quarter,” she said.
Copper has jumped 39 percent since July 1 on the LME, reaching an all-time high of $8,966 on Nov. 11. Goldman Sachs Group Inc. predicts prices may rise to $11,000 in 2011 because of supply shortages.