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Alcoa CEO Kleinfeld Supports Creation of Aluminum-Based ETF

Alcoa CEO Klaus Kleinfeld
Alcoa Chief Executive Officer Klaus Kleinfeld. Photographer: Jin Lee/Bloomberg

Alcoa Inc., the largest U.S. aluminum producer, said it supports the creation of an exchange- traded fund backed by the lightweight metal and would be interested in supplying aluminum for such a product.

“We would be very open to it, very supportive of it,” Chief Executive Officer Klaus Kleinfeld said today in an interview in New York. “We would be open to supply metal.”

An aluminum ETF would allow investors to hold the metal without the capital requirements and warehousing costs involved in owning the physical metal that’s traded on the London Metal Exchange, Kleinfeld said.

Aluminum will most likely be the first industrial metal used to back an exchange-traded product, a Bloomberg survey of analysts showed last month. Already $100 billion has been invested in precious-metal funds.

Oleg Deripaska, the CEO and biggest shareholder of Moscow-based United Co. Rusal, the world’s largest aluminum maker, said in June that his company and other producers were in talks to supply the metal to a fund. ETF Securities Ltd., manager of $22 billion in assets, said Oct. 11 it’s preparing to start exchange-traded commodities funds backed by six industrial metals including aluminum and copper.

“In today’s world, where there is more and more volatility, people have discovered that aluminum can be a very interesting asset class by itself,” Kleinfeld said following a day of presentations by Alcoa to investors.

Timothy Reyes, president of materials management at Alcoa, said there will be a “suite” of base-metals ETFs “eventually,” including an aluminum ETF. He spoke in response to a question during one of the presentations. Alcoa also forecast aluminum demand climbing 13 percent this year and doubling by 2020.

Aluminum for delivery in three months on the LME dropped $21 to close at $2,448 a metric ton today. The metal, used in beverage cans and auto-body panels, has advanced 9.8 percent this year. Global inventories tracked by the LME have declined 7.9 percent in 2010 to 4.26 million tons.

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