Copper ETFs drive base metals market

NEW YORK (Commodity Online): 2011 is going to be the year of copper as far as commodities investment is concerned. Driven by a deficit of copper output and surging demand for the base metal, investors in the red metal are going to laugh all the way to their banks this year.

Aiding this unprecedented rally in copper are the exchange traded funds (ETFs) in copper.

As base metals trading led by copper booms, the red metal has turned out to be a hot favourite for investors, traders, manufacturers and commodity dealers around the world. And copper is going to get another investment edge thanks to the metal’s big ticket entry into the ETF world.

Remember that copper is into the ETF arena, backed by its physical strength, when the commodity price has surged to a record of 30-month high last week.

Currently, there are several Copper ETFs listed across exchanges in the United States. They include First Trust ISE Global Copper (NASDAQ: CU), Global X Copper Miners ETF (NYSEArca: COPX), iPath DJ-UBS Copper (NYSEArca: JJC), Global X Copper Miners ETF (NYSE:COPX), First Trust ISE Global Copper Index Fund (NYSE:CU), PowerShares DB Base Metals (NYSE:DBB) and iShares MSCI Chile Index (NYSE:ECH).

Several ETFs backed by physical copper are hitting the global markets these days. Copper-backed ETFs have turned out to be the big commodities news recently as many analysts have predicted that they would become bigger than Gold ETFs. Gold ETFs are the biggest exchange traded funds in the world currently.

The front runner for launching new Copper ETFs include JPMorgan, Deutsche Bank (NYSE: DB), iShares and ETF Securities. Recently, JPMorgan Chase (NYSE: JPM) traded a massive $1.5 billion in copper on the London Mercantile Exchange.

According to the International Copper Study Group, a copper deficit of 435,000 metric tons in 2011 is expected to emerge in the markets, marking the first deficit in three years, during which global production has averaged 18 million tons.

Latest estimate says that China will triple its consumption of copper to 20 million tons by 2020. China will account for 49% of world copper sales by then.

With ETFs getting active, copper price is going to be bullish in the coming months.

Base metals analysts have predicted that copper price might rise by 50% to $12,000 a metric ton in the next six to 12 months.

When it comes to copper, it is not the physically-backed Copper ETFs alone that are going to make an impact in the commodities market. Copping mining ETFs are also doing wonderfully well among investors.