BASE METAL ETCS
delivery, in fact this rarely occurs, and even where it does there is time to arrange for it. “ETFs, on the other hand, can immediately take metal
out of the market, potentially leading to physical scarcity. If investment in ETFs proves to be highly responsive to news, such as an earthquake in Chile for example, a relatively modest supply disruption could turn into a much larger one, directly impacting the ability of consumers to buy the red metal.” BME certainly factors ETFs into its supply-demand equation for 2011. They are looking for ETF holdings in copper to rise up to 170,000 tonnes in the fourth quarter of next year.
Dealing Costs Are Very Important Another question to ask is what about dealing costs and possible restrictions on selling. The JP Morgan tombstone with the filing says “The Trust’s fees and expenses are expected to be lower than the costs an individual would incur for the purchase and storage of physical copper.” One would like to see it all spelt out in dollars and cents
per tonne and what the management fees will actually be. If copper proves to be as volatile a market next year, then an ability to job in and out of the market relatively cheaply would be a great advantage.
Copper ETFs BlackRock also wants to launch a physically backed ETF. It plans to issue up to 12,120,000 shares. The metal will
ETF Securities’ Base Metal ETCs Industrial Metal ETCs have been designed to “bolt on” to
the pricing, delivery and rules of the LME – the world’s most respected exchange for the trading of industrial metals. The issuer – ETFS Industrial Metal Securities Limited – will effect all creations and redemptions through a special purpose LME account and will be subject to the LME rules and regulations, including lending guidance. Market makers will be able to effect creations and redemptions against delivery of LME physical metal, evidenced by LME Warrants. This will ensure the transparency of all trading in the underling physical metal. The Issuer will initially hold metal as LME Warrants but
may move some (but not all) metal off-warrant as assets build up in order to stay within lending guidance and to reduce storage fees. At all times, all metal will be stored in warehouses which are approved and audited by the LME. The costs of holding the ETCs will comprise a management fee as well as storage and insurance fees. Storage fees will be capped at the warehouse fees published annually by the LME but may be reduced over time if the Issuer is able to negotiate lower fees once assets build up.
be stored in LME-registered warehouses owned by Metro International Trade Services LLC. BlackRock’s initial unit of the iShares Copper Trust Fund will consist of 2,500 shares, called a basket, backed by 25 tonnes of copper. One share would equal 10 kilos of copper (22.0462 lbs) but BlackRock
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