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Copper ETFs to Watch on Strong Global Fundamentals

Zacks Equity Research
Wall Street finished in the green reversing its five-day negative trend on Thursday following news that United States and China have ramped up their efforts to resolve lingering trade disputes

Copper is undoubtedly the most talked-about industrial metal and is currently seeing a rally in price, driven by strong demand from the world’s largest consumer, China, and robust global economic growth.

Increased Demand in China

China is the biggest consumer of copper, accounting for around 50% of the global demand for the metal. Although Chinese imports of the metal declined slightly in February on a monthly basis, it rose on a year-over-year basis. In the first two months of 2018, China’s unwrought copper imports increased 10.4% from the same period last year. Moreover, copper concentrate imports rose 14.5% year over year.

China’s Industrial output grew 7.2% year over year in the first two months of 2018 compared with 6.2% last December and above 6.1% projected by analysts. Therefore, the emerging market nation has been showing signs of strong growth despite facing risks like the crackdown on pollution, increasing financial threats and concerns surrounding possibilities of a trade war with Trump-led United States (read: China Had a Strong Start in 2018: ETFs to Buy).

Global Economic Scenario

Strong global economic growth is driving demand for the red metal. The Organization for Economic Cooperation and Development raised its global growth forecast for 2018 and 2019 to 3.9% from a previous estimate of 3.6%. The agency expects a rebound in trade and global business investment to lead the way for global growth. "We think that the stronger economy is here to stay for the next couple years," acting OECD chief economist Alvaro Pereira told Reuters.

Copper is widely used in construction as well as manufacturing activities. Thus, strong global economic fundamentals bear a positive outlook for the industrial metal’s demand. Moreover, requirements for charging stations to support the higher attention grabbed by electric cars in the future are expected to drive demand for copper.

Let us now discuss a few ETFs focused on providing exposure to copper (see all Industrial Metal ETFs here).

iPath Dow Jones-UBS Copper ETN JJC

This fund offers exposure to one of the most widely-used industrial metals. It seeks to deliver the returns of copper and tracks the Dow Jones-UBS Copper Subindex Total Return index. The index provides returns available through unleveraged investments in futures contracts on the metal.

It has AUM of $68.3 million and charges a fee of 75 basis points a year. JJC trades in an approximate volume of 51,000 shares. It has returned 15.4% in a year.

Global X Copper Miners ETF COPX

This ETF seeks to provide exposure to copper mining companies and can be used to attain portfolio diversification through equity exposure to the metal. It tracks the Solactive Global Copper Miners Index.

It has AUM of $89.3 million and charges a fee of 65 basis points a year. COPX trades in an approximate volume of 64,000 shares. It has returned 22.3% in a year.

United States Copper Index Fund CPER

This fund seeks to provide exposure to copper by tracking the return of Summer Haven Copper Total Return index.

It has AUM of $14.1 million and charges a fee of 80 basis points a year. CPER trades in an approximate volume of 8,000 shares. It has returned 14.5% in a year.

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IPATH-BB COPR (JJC): ETF Research Reports
 
GLBL-X COPPER (COPX): ETF Research Reports
 
US-COPPER IF (CPER): ETF Research Reports
 
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