3 Copper ETFs to Keep an Eye On in 2022
The copper industry has been gaining momentum in recent months as prices rise. And investors expect demand to soar as this metal plays a role in replacing oil with green energy. However, should you invest in copper exchange-traded funds (ETFs)? Let’s take a closer look below.
Copper ETFs: An Overview
Copper reached an all-time high in May 2021 at $4.90 per pound. Investors also regard copper as a stable store of value and an inflation hedge.
Demand is expected to continue to soar long-term. Both analysts and experts agree that efforts to decarbonize will increase copper demand in the upcoming years. Furthermore, according to JP Morgan, copper will account for over 40% of overall demand growth next year.
The funds below focus on copper futures contracts and copper mining. So, as demand continues, these funds present a unique opportunity…
3 Copper ETFs to Consider in 2022
- United States Copper Index Fund (NYSE: CPER)
- iPath Series B Bloomberg Copper Subindex Total Return ETN (NYSE: JJC)
- Global X Copper Miners ETF (NYSE: COPX)
Let’s take a look at these copper ETFs in more detail…
Copper ETF Highlights
United States Copper Index Fund
Expense ratio: 0.8%
The United States Copper Index Fund is similar to a commodity pool, and it has just under 10 holdings. The top cash holdings in this fund are the U.S. Government Money Market Fund and the Goldman Sachs Financial Square Government Fund. So, it has a large cash weighting.
The copper ETF seeks to track the performance of the SummerHaven Copper Index Total Return. This is a single-commodity index that trades on the COMEX exchange. The copper index consists of a few eligible copper futures contracts.
It selects eligible contracts every month on a rule-based system developed by Summer Haven Indexing. These copper index contracts are considered the benchmark component copper futures contracts.
This process helps to lower the ill effects of contango. The system for selecting COMEX copper futures contracts is as follows…
- If the copper futures curve is in backwardation, it will select the two copper contracts from the first four with the greatest backwardation (or least contango) – each weighted at 50%.
- If the copper futures curve is in contango, then the copper index takes positions in three contracts as follows. From the first four eligible contracts, it selects the two with the greatest backwardation (or least contango), each weighted at 25%. It also takes a 50% position in the December contract that expires following the previously examined four contracts.
Trading commodities and futures is complex. But with copper ETFs, you don’t have to worry about the trading. You can make a simple investment, and the fund providers do the work for you.
iPath Series B Bloomberg Copper Subindex Total Return ETN
Expense ratio: 0.45%
This fund isn’t technically an ETF, but it has some similarities. It’s structured as an exchange-traded note (ETN). The fund invests in copper futures. It tracks an index that consists of a single copper futures contract at a time.
This fund follows a fixed schedule that rolls into contracts two months before maturity in February, April and June, as well as contracts three months from maturity in August and November.
The fund tracks the Bloomberg Copper Subindex Total Return. This reflects potential returns that are available in futures contracts on copper.
Global X Copper Miners ETF
Expense ratio: 0.65%
The Global X Copper Miners ETF seeks to track the performance of the Solactive Global Copper Miners Total Return Index. This fund invests directly in global companies that focus on copper mining and processing.
This fund has over 40 holdings. The largest ones by market value are Australia-based company OZ Minerals and the U.S.-based company Freeport-McMoRan. These are sustainable mining companies with efficient and low-cost methods.
Final Thoughts on Copper ETFs
The copper market is an interesting one for investors. The industry is catching the eye of investors after record breaking numbers in 2021. However, there are always risks to consider before investing. As always, you should do your own research before you decide to invest in copper ETFs.
If you’re interested in even more copper investing opportunities, consider checking out these copper stocks with growth potential.
About Aimee Bohn
Aimee Bohn graduated from the College of Business and Economics at Towson University. Her background in marketing research helps her uncover valuable trends. Over the past year, her primary focus has been researching IPOs and other trends.