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Financials

UPDATE 2-Base metals ETPs make cautious LSE debut

* Copper, tin, nickel ETPs launched on London Stock Exchange

* Aluminium, zinc, lead and metals basket ETPs due in 2011

(Updates prices)

LONDON, Dec 10 (Reuters) - ETF Securities’ physically backed copper, tin and nickel exchange-traded products made a tentative debut in London on Friday, as investors sought to gauge sentiment ahead of potentially larger offerings.

The copper ETP PHCU.L closed at $45.27 per share with turnover at $16.31 million on volume of 357,298 shares, and versus an open of $45.75. Nickel PHNI.L closed at $118.72, unchanged from the open, and with turnover at $15.98 million. Tin PHSN.L was untraded but last bid at $127.39/$129.01.

“Is it the opening of the flood gates, or just a damp squib?” said David Wilson, analyst at Societe Generale.

“The next couple of weeks will be very interesting to see what the level of interest is. You do wonder if investors may wait until the bigger players’ products are launched,” he added.

ETF Securities, which owns some of the world's largest ETPs backed by precious metals, beat both BlackRock Asset Management BLK.N and investment bank JPMorgan JPM.N to the punch with the launch. ETF has said its physically backed ETPs for industrial metals are the world's first. [ID:nN07590078]

Concerns that ETPs will exacerbate tight supplies of copper helped propel prices to a record high $9,091 a tonne on Thursday.

Deutsche Bank said in October ETPs backed by copper could hold 300,000 to 400,000 tonnes of metal. That compares with stocks of about 350,000 tonnes in London Metal Exchange warehouses now.

Falling ore grades, disruptions and project delays also mean that copper supply will, possibly starting this year, fall short of demand estimated at about 19 million tonnes this year.

On Friday, strong data from top copper consumer China signalled its economy was robust and its already big appetite for the metal used in construction and power could increase. Its copper imports surged nearly 30 percent last month. [ID:nL3E6NA0BS]

By 1653 GMT, three-month copper CMCU3 on the London Metal Exchange was trading at $8,973.75 a tonne compared with $8,940 at the close on Thursday. Tin CMSN3 was at $25,601 from $25,895 and nickel CMNI3 at $23,980, from $23,600.

“(The launch) adds another worry, physical consumers are going to have to compete with financial investors who will be holding copper,” said Robin Bhar, analyst at Credit Agricole.

“It drains metal away from the market, tightens it up, keeps spreads tight and keeps prices well supported.”

MORE NEXT YEAR

ETF Securities said physical aluminium, lead, zinc and a basket of industrial metals ETPs would be available next year.

Investors can trade the products as shares with daily liquidity rather than investing in funds or commodity-index products which mostly use futures and lock up capital for long periods of times -- often years.

ETF Securities said the ETPs had been designed to “bolt on” to the pricing, delivery and rules of the London Metal Exchange.

All creations and redemptions will go through a special purpose LME account and will be subject to the LME rules and regulations, including lending guidance.

For all the ETPs listed so far the management fee is 0.69 percent a year, insurance costs 0.12 percent. Storage costs for copper are 36 U.S. cents a day per tonne, for tin they are 42 cents a day and for nickel 45 cents a tonne a day.

"The fact that the launch is starting with copper, tin and nickel -- the most expensive LME commodities per tonne -- to me reflects the real impact storage costs have on potential returns," said Paul Robinson, group manager, non-ferrous metals at CRU Group. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Q+A-Physical copper, tin, nickel ETPs: [ID:nLDE6B915R] ETF Securities factbox: [ID:nN07590078] LME guidance: here Consumer base metal interviews: [ID:nLDE6B81L8] [ID:nLDE6B70Z7] Reuters column: [ID:nLDE6B81UO] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Additional reporting by Marie-Louise Gumuchian and Pratima Desai; editing by Sue Thomas

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