TOKYO, June 30 -- United Co. Rusal, the world's largest aluminum producer, said an exchange-traded fund for the metal is set to start as early as next month, offering support after lower prices forced smelters globally to shut.
Rusal and other producers are in talks to supply the metal for the fund, which may buy as much as 1 million metric tons of aluminum in a year, Chief Executive Officer Oleg Deripaska told reporters in Tokyo today, without identifying which financial institution will introduce the product.
Aluminum prices in London have declined 11 percent this year amid concerns China's measures to curb its property market will curtail demand and as the European debt crisis roiled markets. An exchange-traded fund may help support metal prices as physical demand stayed strong, Deripaska said.
"You will see the first ETF launch next month, as far as I understand," Deripaska said. "It's a new instrument to hedge" against risks stemming from currency fluctuations and energy prices, he said.
Aluminum for three-month delivery on the London Metal Exchange dropped 1.9 percent to $1,990 a metric ton at 7:02 p.m. Tokyo time. Prices closed at $1,867.50 a ton on June 7, the lowest level in eight months. The price reached an 18-month high on April 16.
Ready for Investors
Investors buy exchange-traded funds as a way to gain from price increases in the underlying commodity. At least three aluminum ETFs are "technically" ready to be offered to investors, Deripaska said in April.
Prices of the metal will rise to $2,400 a ton by the end of the year as physical demand remains healthy, he said today. Rusal, based in Moscow, won't change its production target this year, he said.
"Improvement in the transportation sector for the last six months creates quite a good demand," Deripaska said.
The transportation industry is the biggest user of aluminum, the world's second-most used metal. Carlos Ghosn, chief executive officer of Renault SA and Nissan Motor Corp., expects car production to gain about 11 percent this year.
Deripaska on June 9 said a slump in the metal price may prompt producers to shut smelters, leading to a supply shortfall. Between 2 million and 3 million metric tons of capacity may be halted in the second and third quarters, with about 70 percent of the smelters globally unprofitable at current prices, he said.
Prices in China, the largest consumer of the metal, have dropped below the cost of production, Aluminum Corp. of China Ltd. said June 8.