J.P. Morgan advises that the copper mine support will reach 16.3 million tonnes, a 1.5% increase from last year. The U.S. Geological Survey estimates that proven and probable reserves amount to around 550 million tonnes. BHP Billiton and Brook Hunt have both indicated that copper reserves and resources are around 30 years of current demand levels.

"In addition to mine disruptions, supply projections are curbed by a limited new project pipeline concentrated primarily in Africa and Latin America," J.P. Morgan noted.

In their filing, J.P. Morgan projects a 9% growth in copper demand this year. Current total copper projects in 2010 are 23.4 million tonnes including refined copper production from primary and secondary material and the direct use of secondary material in the fabric sector.
The participants in the world copper market include the commercial sector, the manufacturing sector, the banking sector and the investment sector.

J.P. Morgan's trust will only hold Physical Copper Grade A as assets and will not trade in copper future contracts on any futures exchange. The trust will take delivery of physical copper in the form of LME Copper Cathodes.

Eoin Treacy's view I'm all for the development of new products that make investing in previously inaccessible asset classes easier. However, with industrial and food commodities the situation is muddied somewhat since they are often in fairly limited supply and are integral to the efficient functioning of the global economy. Hoarding resources with the deliberate ambition of driving prices higher acts as a tax on the consumers of these resources and will encounter resistance at some stage. There are rules to make sure no one investor corners the market, however, funds actively withdrawing supply are pursuing a similar strategy and one has to wonder how long it will be allowed to persist, particularly when commodity price rises begin to feed into inflationary measures.

For the moment at least, the physical copper fund is unlikely to pose a threat to inflation but if it attracts investors as the oil and gold ETFs have, it could grow quite quickly to occupy a dominant position in the market which will necessitate tighter regulation.

Copper has posted a relatively steady progression of higher reaction lows since June, with the most recent in the region of $3.70. It is now somewhat overbought as it tests the highs near $4 and while the risk of a pause in this region has risen a sustained move below the 200-day MA would be required to question medium-term upside potential.