6 Reasons to Like the Aluminum ETF | ETF Trends

It’s a good time for aluminum. Not only is the first exchange traded fund (ETF) to track the metal’s producers now trading, but one of the largest producers forecasts a major bump in prices.

Perennial earnings season leader Alcoa Aluminum (NYSE: AA) released its fourth-quarter results, and they did not disappoint.

  • Not only did the producer’s profits beat analyst forecasts, but those profits were the largest since the third quarter of 2008, says Bloomberg.
  • Alcoa hardly believes aluminum’s run is done; it projects global aluminum growth will grow 12% this year.
  • Aluminum demand rose 14% last year – the biggest increase since 1996.
  • According to Metal Miner, two key factors in aluminum include the global production projection are the auto market and ETFs.
  • Global and U.S. manufacturing data continued to be positive late into last year. Coupled with global demand, this should overcome the idle capacity in U.S. aluminum production.
  • Auto sector demand is poised to be one of the largest drivers of aluminum demand, especially in the United States and China.

There are a few ways to get exposure via ETFs.

Global X Aluminum (NYSEArca: ALUM) is one of the newest offerings, though it’s not physically-backed; this fund gives equity exposure to a global list of aluminum producers. It’s the only pure play aluminum ETF on the market right now. [First Aluminum ETF Makes Its Debut.]

PowerShares DB Base Metals (NYSEArca: DBB) gives exposure to futures contracts on aluminum, zinc and copper. [Will Base Metals ETFs Lead to a Nation of Hoarders?]

iPath DJ-UBS Aluminum ETN (JJU) is the exchange traded note (ETN) option, which gives exposure to a basket of aluminum futures.

Let’s not forget there could soon be a physically-backed aluminum ETF. Watchers say that this has the potential to send prices even further higher when it comes to market.

Tisha Guerrero contributed to this article.

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.