Alcoa Inc. shares fell over 6 percent to a 52-week low Monday after Deutsche Bank downgraded the biggest U.S. aluminum producer amid concerns about recent metal price declines.
The bank cut Alcoa's investment rating to "hold" from "buy" and lowered its stock price target to $14 from $20, saying it believes industrial metals will be hurt by the European debt crisis and a slowdown in emerging markets.
In afternoon trading on the New York Stock Exchange, Alcoa stock was at $8.99, below its 52-week low of $9.56 set last Friday. Earlier in the session, the stock traded down as far as $8.95.
The downgrade came after prices for three-month aluminum on the London Metals Exchange recently hit one-year lows below $2,150 per tonne, down from peaks of over $2,800 in May, on fears that the West's sovereign debt crisis could depress the world economy.
The aluminum price actually rose Monday to $2,188.50, from $2,163 Friday, and copper rebounded from 14-month lows hit earlier on Monday following stronger-than-expected manufacturing figures from the United States.
But analysts said there were lingering worries about the euro zone debt crisis, and concerns about demand from top consumer China also continued to put pressure on prices.
Analyst Charles Bradford of Bradford Research in New York, said Alcoa's fortunes are tied closely to the aluminum price and he expects the company's third-quarter profit next week to be lower than the second quarter's.
"It's all about the metal price and the markets have taken a big tumble," said Bradford.
Metal Bulletin Research analyst Kamil Wlazly said the recent divergence between the fall in prices of copper and aluminum "underlines the perception that commodities investors always turn to marginal cost of production in order to guess the potential losses during a market downturn.
"The price of aluminum is already at levels below its average marginal cost of production of close to $2,500 per tonne," he said.
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