For investors finding gold prices prohibitive, copper is worth considering. With increasing demand driven by investments in artificial intelligence (AI) data centers and power grids, coupled with supply constraints, copper prices have reached record highs. However, even among copper exchange-traded funds (ETFs), returns can vary significantly based on the underlying assets, necessitating careful evaluation.
According to the Ministry of Trade, Industry and Energy, on August 17, the London Metal Exchange (LME) spot price for copper hit $14,850 per ton. This marks an 18.13% increase since the beginning of the year and is the highest price on record.
The potential for further increases in copper prices is high. Demand is rising due to the expansion of AI data centers and power grids, while production cannot be ramped up significantly in the short term. Additionally, production disruptions are exacerbating supply constraints. Ok Ji-hwa, a researcher at Samsung Securities, stated, "Copper producers are facing declining grades at aging mines and are struggling to initiate new projects and increase output. Despite investments amounting to billions of dollars, the slow pace of production increases raises concerns that new demand will not be met by supply."
How can investors engage in copper investments? A straightforward option for individual investors is through ETFs. The domestic market offers copper investment ETFs such as 'TIGER Physical Copper' and 'KODEX Copper Futures (H)'. 'TIGER Physical Copper' invests in the spot price of copper, structured to invest in warehouse receipts for copper stored in government warehouses, allowing investment in the spot price without rollover costs associated with futures contracts. In contrast, 'KODEX Copper Futures (H)' is based on copper futures traded in the United States.
Returns vary by product. From July 14 to August 14, 'KODEX Copper Futures (H)' rose by 3.07%, while 'TIGER Physical Copper' fell by 0.51%. This discrepancy arises because the two products track different copper prices. 'KODEX Copper Futures (H)' follows the price of copper futures traded in the U.S., while 'TIGER Physical Copper' reflects the LME spot price. Recently, speculation about potential tariffs on refined copper imports into the U.S. has led to increased demand for futures as investors seek to secure copper before tariffs are implemented, widening the price gap between spot and futures.
If one expects the spot price of copper to rise in the medium to long term and wants to avoid costs associated with futures rollovers, a physical ETF is a good choice. Conversely, if one anticipates price strength in futures due to U.S. copper supply and tariff policies, a futures ETF may be a viable option.
* This article has been translated by AI.
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