UPDATE 2-US regulator approves BlackRock's copper ETF plan

Mon Feb 25, 2013 3:53am EST

* BlackRock could eventually take 121,000 tonnes of copper to back product

* BlackRock's copper ETF pool double the size of rival JPM product

By Rujun Shen and Melanie Burton

SINGAPORE, Feb 25 (Reuters) - BlackRock Inc, the world's largest money manager, has won approval from the U.S. securities regulator to list a copper-backed exchange-traded fund, potentially moving ahead of JPMorgan whose listing of a similar product has been delayed by industry objections.

The U.S. Securities and Exchanges Commission approved a proposed rule change to list and trade shares of the iShares Copper Trust on NYSE Arca, it said on its website (www.sec.gov).

The launch of copper ETFs are intended to give large U.S.-based funds easier access to the copper market, but some industrial users worry that such products will remove a large chunk of the metal from the market and inflate prices.

"Some of the big U.S. institutions looking at inflation hedges may decide to invest...(but) these ETFS would have to be hugely popular from day one to make a dent in a surplus," said analyst Robin Bhar of Societe Generale.

"It could still be several months before investors are able to purchase shares in the exchange-traded fund. I would not be surprised if there is a legal challenge even to the BlackRock ETF," he added.

JPMorgan Chase & Co. 's rival product was approved about two months ago, but it has not yet listed due to objections from some in the copper industry.

Any impact on prices is expected to be limited, given slowing demand growth in top consumer China which has taken much of the heat out of commodities prices and as copper supply is expected to exceed demand this year. Analysts expect purchases, at least initially, to be slow.

BlackRock's copper ETF could take up to 121,000 tonnes of copper as guarantee against shares in its fund, while JPMorgan's fund would store around half that amount, with copper valued at up to $499,761,150 - equivalent to about 62,000 tonnes based on a copper price of $8,000 per tonne.

"It is paving ground for (an) artificial spike in copper prices once the proper macro backdrop is in place," said Dominic Schnider, an analyst at UBS Wealth Management in Singapore.

"But right now we are only looking at copper strength related to the cyclical uptick in demand, and I am not sure if that will be enough to motivate investors."

The global market for refined copper is expected to swing into a 281,000-tonne surplus in 2013 from a deficit last year, the International Wrought Copper Council (IWCC) has said, with mine supply growing against a backdrop of tepid demand.

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