Possible higher copper demand in China could boost related ETFs

Copper futures (HGH2) rose for the second straight day to reach $4.5 per tonne on optimism over future demand from China, the world's largest copper consumer.

The People's Bank of China said Thursday that it cut its five-year loan prime rate, a benchmark for medium and longer-term loans including mortgages, to 4.60% from 4.65%, the first such cut since April 2020. The move is set to help its ailing property sector after Evergrande's fallout and also to boost consumer activity, which has been slowing recently and dampening copper demand. The Hang Seng Mainland Properties Index, which tracks the performance of property developers traded on the Hong Kong stock exchange, rose by 4.64%. The positive update for China's largest copper-consuming industry is reflected in the metal's recent uptrend.

On the supply side, China's refined copper production rose 7.4% year-on-year in 2021, exceeding 10 million tonnes for the second straight year and beating the previous peak in 2020. In December however, output fell 6.1%. Meanwhile, Barrick Gold, the world's second-largest gold mining company reported a preliminary copper production of 415 million pounds in 2021 — 9% lower than in 2020 and within the guidance range of 410 to 460 million pounds.

On the ETF side, investors haven't shown any notable enthusiasm towards Copper ETFs yet. Year-to-date, over $9 million were pulled out from ETFs with exposure to copper commodity and copper mining stocks. However, the Global X Copper Miners ETF (COPX) — the largest copper miners ETF with $1.8 billion in assets — has been the best performing among copper peers, generating over +10% this year. Its European doppelganger, the Global X Copper Miners UCITS ETF (COPX:LN), closely mimics returns over the same period.

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