Don’t Legitimize Cornering the Copper Market

When the Hunt brothers cornered the silver market in 1980 by amassing a huge cache of the precious metal, jeweler Tiffany & Co. ran an advertisement in the New York Times denouncing the move: “We think it is unconscionable for anyone to hoard several billion, yes billion, dollars worth of silver and thus drive the price up.”

Might the copper market suffer a similar squeeze? Until now, I would have been confident in saying no. But speculators are about to get an easy and completely legal way to dominate the market for the red metal — a development that regulators seem far too relaxed about.

Sprott Inc., a Canadian investment firm, has launched a $100 million fund that will buy and hold physical copper on behalf of investors. Unlike most other speculative products that buy financial derivatives, such as futures contracts, the new vehicle will purchase actual metal, stored in a warehouse.

Copper doesn’t have the luster of silver or gold, but it’s crucial for the global economy, particularly as the electrification of everything makes copper more essential. A copper squeeze would be, therefore, detrimental for global economic growth and inflation. Consumers – think about wire companies that produce electrical cables, electric-car manufacturers and air-conditioner makers -- should be alarmed. A decade ago, when JPMorgan Chase & Co. and BlackRock Inc. proposed similar products, US copper users went to court to block them. Both firms ultimately abandoned their projects.

hoarding metal