J.P. Morgan to launch Physical Copper ETF

J.P. Morgan has filed documents with the SEC to launch an exchange traded fund backed by physical copper. No start date or ticker name is mentioned in the filing.

Author: Dorothy Kosich
Posted: Tuesday , 26 Oct 2010

RENO, NV -

J.P. Morgan has filed an S-1 Registration Statement with the SEC for the J.P. Morgan Physical Copper Trust.

The amount of shares to be registered is 6,180,000 at a proposed maximum offering price of $80.87 per share. The trust's sponsor is J.P. Morgan Commodity ETF Services.

In their SEC filing, J.P. Morgan said, "The shares are designed to mirror as closely as possible the performance of the price of physical copper..." The shares will trade on the NYSE.

J.P. Morgan advises that the copper mine support will reach 16.3 million tonnes, a 1.5% increase from last year. The U.S. Geological Survey estimates that proven and probable reserves amount to around 550 million tonnes. BHP Billiton and Brook Hunt have both indicated that copper reserves and resources are around 30 years of current demand levels.

"In addition to mine disruptions, supply projections are curbed by a limited new project pipeline concentrated primarily in Africa and Latin America," J.P. Morgan noted.

In their filing, J.P. Morgan projects a 9% growth in copper demand this year. Current total copper projects in 2010 are 23.4 million tonnes including refined copper production from primary and secondary material and the direct use of secondary material in the fabric sector.

The participants in the world copper market include the commercial sector, the manufacturing sector, the banking sector and the investment sector.

J.P. Morgan's trust will only hold Physical Copper Grade A as assets and will not trade in copper future contracts on any futures exchange. The trust will take delivery of physical copper in the form of LME Copper Cathodes.

The Henry Bath Group, a wholly owned subsidiary of J.P. Morgan Ventures Energy Corporation, will serve as the warehouse keeper of the trust's physical copper. The trust's physical copper will initially be held in warehouses in Germany, the Netherlands, Italy, Malaysia, Singapore, Spain, South Korea, the United Kingdom and the United States. Bloomberg reports copper for the new product will be held in Henry Bath's storage in the U.S.

The Initial Creation Unit equals a block of 2,500 shares for 25 tonnes per copper. Each share will be equal to the value of 1/100 of a metric tonne of copper on the date of the formation of the J.P. Morgan Physical Copper Trust.