There’s a glut of aluminum in the world markets, and a physically backed aluminum exchange traded fund (ETF) could be just the ticket to eat up the supply and boost prices.
Credit Suisse Group is planning to launch an aluminum-focused ETF. If the fund receives the green light, the merchant, Glencore, will need to buy aluminum as physical backing for the fund. The Swiss company has yet to make a regulatory filing, so it’s unclear as to when this fund would come to pass, explains Andrea Hotter for The Wall Street Journal.
So why is the timing of an aluminum ETF full of promise? Here are some reasons:
- The timing for this ETF would be optimal. Many aluminum companies were swift to cut production when prices more than halved as the economic downturn crimped demand. Now, that smelters have jumped back into action, the market has suffered.
- On the London Metal Exchange, aluminum is at around $1,800 a ton, up about 50% from seven-year lows in February. The supply push is threatening to send prices to lower, so an ETF would soak up the excess metal.
- One high-profile financing deal is between Russian aluminum producer United Co. Rusal and Glencore. The producer recently held talks with Glencore and other traders over the supply of surplus aluminum.
- If the ETF is successful,it could ease up the price depression. As an example, ETFs have become one of the biggest growth areas for gold demand.
For more stories about aluminum, visit our aluminum category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.