May 16 (Bloomberg) -- Travis Engen, chief executive of aluminum producer Alcan Inc., said he bought 50,000 Alcan shares last week when the stock plunged to the lowest in since July 2003 following a slump in metals prices.

``There's no rational reason for the share price, so I thought it was a buying opportunity,'' Engen said in a telephone interview today. ``Our stock price was hammered,'' he said. The New York-traded shares of Montreal-based Alcan plunged 12 percent last week, the biggest drop since July 2002.

Engen spent $1.55 million on the stock, based on the average closing price for the week of $31.01 on the New York Stock Exchange. Alcan ended the week at $29.41. Alcan, the world's second-biggest aluminum maker, and Pittsburgh-base Alcoa Inc., the biggest, fell as aluminum prices on the London Metal Exchange dropped 14 percent since March 10 to a seven-month low.

``I surmise that it is a trading phenomena,'' Engen said. ``It doesn't seem manifested in what we see in supply and demand, and it doesn't seem manifested in the underlying developments.''

Alcan's shares today rose 15 cents to $29.56, the first increase in six trading days. Engen holds 275,500 shares since the purchase, based on government filings. Aluminum prices in London fell $5 to $1,715 a metric ton today, down from $2,016 on March 11.

The share price is too low given Alcan's rising production from an expanded Alouette plant in Canada and the $257 million in expected cost savings this year from the company's $6.98 billion purchase of Pechiney SA last year, Engen said.

Price Decline

Prices quoted on the London Metal Exchange aren't representative of what Alcan gets for the aluminum it delivers, given that there's no physical delivery of many of the trades made on the London exchange, he said.

``We don't see the impact,'' Engen said.

On May 13, Standard & Poor's credit analyst Donald Marleau cut Alcan's debt rating by one level to BBB+ from A-, partly because of spending on the company's $1.3 billion project to increase capacity at its refinery in Gove, Australia, which makes alumina, the main ingredient in aluminum. The project will boost Alcan's alumina production by about 30 percent.

Before the credit-rating cut, Standard & Poor's had Alcan's A- rating with a negative outlook since July 2003. Standard & Poor's outlook under the lower rating is stable.

``They finally just decided to put us on stable at a different grade,'' Engen said. ``There's no change in the circumstances.''

The company likely will fund the Gove project with cash generated by operations rather than borrowing more, Engen said. The company may take out debt to refinance $763 million of borrowing due within a year, he said.

To contact the reporter on this story: Darrell Hassler in Chicago at dhassler@bloomberg.net.

Last Updated: May 16, 2005 17:28 EDT