* Metals to be stored in Trafigura's warehousing unit
* News likely to stir debate over impact on prices, supplies
* Two copper ETFs planned in U.S.
By Emma Farge and Josephine Mason
GENEVA/NEW YORK, June 27 Swiss asset manager GAM
Holding said on Thursday it plans to launch base metals
funds backed by physical aluminium, copper, nickel and zinc
stored in Trafigura's warehousing unit.
The JB Industrial Metals Funds will use North European
Marine Services (NEMS), a warehousing company owned by
commodities trader Trafigura, to store the metals in London
Metal Exchange-registered facilities, a Swiss & Global
Swiss & Global, a manager for bank Julius Baer and part of
GAM, will run the funds. GAM is Switzerland's largest listed
GAM's funds will be structured like a physical
exchange-traded fund, using metal as collateral against shares
in the funds. But unlike ETFs, GAM will not list the shares on
an exchange, the spokeswoman said.
News of the plans will likely stir the debate over metals
storage and the potential impact of the funds on prices and
supplies of critical industrial raw materials used to make cars,
electrical wiring and stainless steel.
In the United States, copper fabricators have warned that
similar copper funds planned by the world's largest money
manager, BlackRock, and Wall Street bank JPMorgan Chase
& Co will inflate prices and squeeze supplies by
removing a big chunk of metal from the market.
Using NEMS is also significant because NEMS has amassed a
big hoard of base metals in Antwerp, Belgium, which is locked up
in financing deals and is therefore not available to the market
for immediate delivery.
The firm is the largest LME warehouse operator in the port
town where stored metal piles have risen by about 170 percent
since January to more than 120,000 tonnes.
LME warehousing companies - such as NEMS; Pacorini, which is
owned by Glencore; and Metro, which is owned by Goldman Sachs -
have been making money by building up stocks and allowing queues
to grow for consumers to withdraw materials while charging rent
That strategy has angered end-users who say they are paying
physical prices for metal that are not justified by genuine
STIFF OPPOSITION FOR OTHER FUNDS
The ETF initiatives proposed by JPMorgan and BlackRock in
the United States have proved controversial and have faced stiff
The U.S. Securities and Exchange Commission has given the
go-ahead for them to launch two separate copper ETFs, but copper
fabricators are fighting the ruling in the U.S. Court of Appeals
JPMorgan would use its Henry Bath warehousing unit and
BlackRock would store its metal in Metro.
The new funds are intended to give investors easier access
to the metals market without the added costs linked to a market
structure known as contango, where forward prices are more
expensive than the spot, GAM said.
The timing of the launch is not known.
But the news comes as investors' appetite for base metals
has deteriorated due to concerns that demand from China, the
world's biggest copper consumer, will slow.
LME three-month copper prices hit $6,602 per tonne
on Tuesday, their lowest level since July 2010 and down a third
from the peaks close to $10,000 reached in February 2011.
The new JB funds will compete against ETF Securities, which
has launched its own physically backed funds for copper, zinc,
nickel, tin, aluminium and lead over the past three years.
ETF Securities' copper fund has amassed investments
representing just under 4,000 tonnes of metal worth about $34
million at today's prices, while its aluminium fund has just 270
tonnes of metal as collateral worth just under $500,000.
That compares with about 31 million ounces of gold - worth
$40 billion - held in the largest gold-backed ETF.