Investing In Copper Using And ETF / ETN Strategy
At this time there are 5 exchange traded vehicles with exposure to copper. Despite much chatter and speculation in late 2010 that both iShares and JPMorgan were going to launch physical copper etfs there is still nothing available.
The only one option for tracking the actual price of copper is the iPath Dow Jones-UBS Copper ETN (JJC)
Even though it’s an ETN instead of a Copper ETF it is the most direct way to track the price of copper. This ETN basically tracks copper prices using the High Grade Copper Futures contract which trades on the COMEX. Since it uses futures, it does carry the risk of contango causing roll-over losses but this has generally been a much smaller problem in the metals than in oil and natural gas. Since this fund is an ETN it is basically a senior debt issued by Barclay’s so it does contain counter party risk. This became an issue during the credit meltdown in 2008 but doesn’t pose much of a threat in normal times.
Its expense ratio is 0.75% (75 basis points) and the symbol is JJC.
First Trust ISE Global Copper Index ETF (CU)
This ETF was the first of 3 based on copper related mining stocks. It tracks the ISE Global Copper Index so it consists of copper mining companies as well as extractors of other metals so it is not a pure play.
They attempt to compensate for this by weighting each company according to the level of copper exposure they have and the percentage of revenues derived from copper. Geographically, it includes companies in the developed countries with 1/2 the exposure in Canada and the UK.
Its expense ratio is 0.70% (70 basis points) this copper ETF symbol is CU.
Global X Copper Miners ETF (COPX)
The COPX copper etf tracks the Solactive Global Copper Miners Index, which consists of stocks for companies that focus purely on copper mining. There are several companies that overlap with CU but COPX has more smaller mining companies. Geographical this ETF is more concentrated in Canada and the UK making up 2/3 of the exposure.
Its expense ratio is 0.65% (65 basis points) and the copper ETF symbol is COPX.
Emerging Global Shares Emerging Markets Metals & Mining ETF (EMT)
Once again, this is a stock-based ETF that invests in mining and extraction companies but includes companies that mine nickel, gold and platinum in addition to copper. Copper makes up about 50% of the metal produced by these companies. Another major difference is that this ETF focuses on miners that are in emerging markets.
A majority of the miners making up the Dow Jones Emerging Markets Metals & Mining Titans Index tracked by this ETF are located in China and Brazil, with a significant presence in South Africa as well.
Its expense ratio is 0.85% (85 basis points) and this copper ETF trading symbol is EMT.
This is a good place to start when looking to invest in copper, there will most likely be additional “physical” copper ETFs coming to market sometime, but it seems to be taking some time.