Rio (RIO) Really Want Alcoa (AA)?

The rumors are again making the rounds that Rio Tinto (NYSE:RIO) may be interested in acquiring Alcoa (NYSE:AA).

Speculation circulating is Rio Tinto has secured a $25 billion syndication loan to make the purchase.

Traders bid up the share price of Alcoa to $17.74, gaining $0.52, or 3.02 percent, as of 12:09 PM EDT. Options activity also jumped on the rumor, specifically $18 strike calls that expire later in May, as well as June $18 calls. Also attracting attention were the May $19 and June $19 strike calls.

It's doubtful Rio would really be interested in exposing itself to even more aluminum, as the future is far from clear on the supply and demand outlook, and by extension pricing strength and margins.

Rio would probably also face intense regulatory scrutiny because of its past acquisition of Alcan.

Either way, you never know what a company may do. But the idea of aluminum being a major growth metal and market isn't convincing at this time.