* BlackRock could eventually take 121,000 tonnes of copper
to back product
* BlackRock's copper ETF pool double the size of rival JPM
By Rujun Shen and Melanie Burton
SINGAPORE, Feb 25 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.