Copper exchange-traded funds, long pitched as a play on artificial intelligence and power grid investment, have fallen about 5% over the past month. Expectations of a long-term supply shortage remain intact, but forecasts of a 370,000-ton surplus next year are adding uncertainty over whether copper prices can climb further.
TIGER Physical Copper closed at 15,535 won and KODEX Copper Futures (H) at 9,755 won on the 23rd, according to the financial investment industry. The two ETFs are down 5.1% and 4.9%, respectively, from a month earlier. TIGER Physical Copper tracks an index based on London Metal Exchange spot copper prices, while KODEX Copper Futures (H) tracks an index based on copper futures on the New York Commodity Exchange.
The declines follow a drop in LME spot copper to $14,215 a ton on the 22nd, down 3.93% from $14,797 on Sept. 22. That is still 13.08% above the level at the start of the year, $12,571, but the rally has lost momentum. For investors in base metals, the question now is whether to take profits or add to positions.
Industry analysts say the pace of supply growth next year will determine whether prices rebound. Copper set record highs this year even as expectations of rate increases persisted. Analysts said that as long as demand holds firm, supply matters more to pricing than interest rates or the dollar.
The International Copper Study Group projects the global refined copper surplus will widen roughly 3.5-fold, to 368,000 tons next year from 104,000 tons this year. Production is expected to grow 3.4% next year, outpacing consumption growth of 2.5%. The projected glut does not mean AI-related demand is fading. Instead, refined copper supply is set to expand faster than consumption as Indonesia and India add smelting capacity and lift utilization rates, and as recycled copper output rises.
Average price forecasts for next year point to little change from current levels rather than further gains. "In the first half of next year, high interest rates will cap copper prices, and in the second half, as macroeconomic pressure eases, supply factors will again drive prices," said Ok Ji-hoe, an analyst at Samsung Futures, who put the average copper price next year at $14,000 a ton. Samsung Futures said that even if copper rises above $15,000, slowing demand, greater use of scrap and substitution with aluminum would limit further gains. ING, the Dutch financial group, forecast an average copper price of $13,550 next year, as of the 15th of this month.
For futures-based ETFs that track indexes built on COMEX copper futures, such as KODEX Copper Futures (H), U.S. tariffs are another variable. The gap between COMEX and LME prices widened to more than $3,000 a ton in July last year, driven in part by U.S. stockpiling ahead of expected tariffs, but has narrowed to $110 to $250 this month. If the premium on U.S. prices shrinks further, gains for futures-based ETFs could be limited even if global copper prices rebound.
For products without currency hedging, such as TIGER Physical Copper, the won-dollar exchange rate affects returns. Even if copper prices are unchanged, a weaker won raises the value of the assets in won terms, while a stronger won drags on returns.
Overseas, ETFs that invest in shares of global copper miners such as Teck Resources and Southern Copper have also weakened. COPX, listed in the U.S., closed at $73.13 the previous day, down 18.73% over the past month. COPX reflects not only copper prices but also each company's output, mining costs and profit outlook.
