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Copper is easily the most discussed industrial metal, but among mining exchange traded funds, the Global X Copper Miners ETF (NYSE: COPX) often goes overlooked. COPX is nearly eight years old and has $84.7 million in assets under management.
When it comes to copper, Chile is often highlighted as the world's largest producer of the red metal, while China is the world's largest copper consumer. Copper has an array of industrial applications, ranging from construction to infrastructure to technology to transportation, which could bode well for the long-term viability of an ETF such as COPX.
“Copper is widely used in equipment manufacturing, such as for wires, connectors and switches in electronic equipment, as heat exchangers in cooling equipment like air conditioners and refrigerators and in microprocessors of mobile phones, computers and other appliances,” Global X said in a recent note.
More COPX Details
COPX, which tracks the Solactive Global Copper Miners Total Return Index, holds 30 stocks and is lightly allocated to U.S. companies. Freeport-McMoRan Inc. (NYSE: FCX) is one of COPX's largest holdings, but at the end of last year, that stock represented the ETF's entire U.S. exposure.
Canadian miners account for over 34 percent of COPX's geographic weight, by far the ETF's largest geographic exposure. Australia and China combine for more than 18 percent.
“Asia accounts for 69 percent of the world’s copper use, followed by Europe (18 percent) and North America (10 percent),” said Global X. “China alone accounts for 50 percent of the world’s copper demand, driven by the country’s heavy investments in infrastructure.”
While copper wiring for houses and infrastructure may not qualify as “sexy,” there are some other interesting uses for the metal that could benefit COPX.
“Copper is used in most forms of transportation such as airplanes, trains, trucks and cars. An average car uses about 22.5 kg of copper in the form of motors, wires, brakes, bearings, connectors and radiators,” according to Global X. “More modern features such as on-board computers, satellite navigation systems and safety devices also utilize copper.”
The rub is COPX is not for the faint of heart. The ETF carries a standard deviation of almost 45 percent, or more than quadruple the same metric on the S&P 500.
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