The uptake of physically-backed base metal exchange traded funds, or ETFs, has been limp so far and is unlikely to succeed, mainly due to high warehouse rental cost, a Barclays Capital analyst said Sunday.

"One key reason is costs... If you invest in aluminium physically-backed ETFs, just to break even, you need to generate 5% of the return over a year to match the warehousing cost," Nicolas Snowdon, assistant vice president of commodities research, said during an industry conference.