LONDON(Commodity Online): Physically backed copper ETFs is likely to be approved by US Securities and Exchange Commission (SEC) in December but it may not have much impact on the market, according to Nicholas Snowdown, analyst of Barclays Research said in a report.

“Limited investor appetite for a similar product issued in Europe in 2010 has demonstrated non-equivalence with the appetite for ETFs backed by precious metals. One argument that may have some validity is that, with Freeport McMoran diversifying into energy, US institutional investors may struggle to find a pure copper play via equities, making the launch of ETFs potentially opportune,” Snowdwon said in the report.

Snowdown has also questioned the SEC Research on Copper ETFs released last month which concluded that there is no strong relationship between copper inventories and copper prices.

The SEC’s conclusion, which seems to fly in the face of fundamental logic, have been reached via flawed methods? “ We think the Commission’s statistical copper price model posited some questionable causal variables, such as other metals prices, and note that it excluded key fundamental indicators, such as industrial production data. Moreover, the inventory data used (LME stocks) are, in our view, of limited utility relative to a broader indicator including bonded warehouse stocks in China. The study also ignores what we see as a strong relationship between stock levels and LME time spreads.