UC RUSAL expects to supply metal to aluminium ETF

TOKYO, June 29 （Reuters） - Backed by healthy physical demand, what would be the first aluminium-backed exchange traded fund is expected to be launched in July, the head of Russia's UC RUSAL （0486.HK: Quote） （RUAL.PA: Quote） said on Tuesday.

Chief Executive Oleg Deripaska told reporters in Tokyo that RUSAL, the world's biggest aluminium producer, will likely supply aluminium as an underlying asset for the ETF.

While he declined to give more details, such as which company would launch the contract or the size of the ETF, he said 1 million tonnes in size reflected the current positive market.

"Physical demand is at a very healthy level. Premiums for physical demand demonstrate that there is something which is very sustainable," Deripaska said.

For RUSAL, such an ETF is "an important factor for managing stock capacity," and for investors, it gives the opportunity to hedge against commodity, currency, and energy prices because aluminium is an energy-intensive product, he said.

The company has previously said it was considering launching an ETF that could lock up more than a million tonnes, while sources had previously told Reuters that Glencore and Credit Suisse are interested in launching an aluminium fund.

Deripaska said that as soon as fears over Europe's debt problems disappear, something that could happen by the end of 2010, aluminium prices MAL3 could recover up to $2,400 a tonne.

At 1030 GMT on Tuesday prices were hovering just below $2,000 a tonne, well off the record high of $3,380 a tonne struck in 2008.

Deripaska also told reporters that RUSAL would resume operations at its Ewarton Works plant in Jamaica by the end of August. The facility was stopped in 2009 due to cost cuts.

"It will be in full capacity. Already this year, we'll take delivery to Russia from Jamaica," he said.

The company has said it plans to produce about 321,000 tonnes per year of alumina at the plant this year, or about half of its capacity.

RUSAL became the world's biggest aluminium producer through a string of acquisitions and expansion last decade, but the global economic crisis and subsequent downturn in aluminium prices plunged the group into a debt crisis.

It eventually restructured $16.8 billion of debt late last year, and launched IPOs in Hong Kong and Paris in January.

Deripaska said he expected the company's share prices on the Hong Kong exchange to recover when aluminium prices rebound.

The company swung into the black during the first three months of the year after flirting with collapse amid heavy losses and mammoth debts in 2009.

(sourced from Reuters)