Aluminum ETF(s) Could Be In The Works

Citing a Citigroup analyst note, Bloomberg News is reporting that ETFs backed by physical aluminum could find their way to market at some point and that the introduction of an aluminum ETF could lead to a spike in the underlying commodity. The Citigroup note said aluminum prices could rise by $500 per metric ton, which would be a gain of 24%. United Co. Rusal, the world’s biggest producer, said last month it was in talks to supply metal to banks for possible ETFs, according to Bloomberg. Given that aluminum stocks are more plentiful than those of copper, nickel or zinc, an aluminum ETF is likely to come to market before ETFs for those metals. Copper and nickel ETNs are currently available to U.S. investors. ETFs backed by physical metal holdings such as the SPDR Gold Shares

have proven popular with investors and they do impact prices of the underlying commodity because with every new share of the ETF that is created, the issuer must purchase more of that metal. While Rusal says three aluminum ETFs are "technically" ready to come to market, Citigroup said financing and warehousing costs are potential obstacles, Bloomberg reported. The Professor thinks an aluminum ETF is a fine idea, but don't be surprised to see the first ETF in this genre trade in London, not here in the States. Potential issuers were not mentioned, but the Professor notes ETF Securities would be a logical issuer for an aluminum ETF, but that is just an opinion.