The Street
Alcoa Hampered by Europe's Uncertainty
Edited by : AL CIRCLE
2 min read
Shares of Alcoa(AA) continued to slump in December as economic uncertainty that surrounds the European debt crisis weighs on the global aluminum market.
Shares of the Pittsburgh-based aluminum producer fell 2.4% to $9.14 after German Chancellor Angela Merkel reiterated objections to a bigger European Stability Mechanism bailout fund.
Shares of the Dow component are down 37.4% in 2011 and have dropped 7.3% so far this month.
"We tend to see aluminum pricing move more closely with global economic sentiment rather than the true fundamentals of aluminum," Bridget Freas, Morningstar's aluminum analyst, said. "So we see the same thing happening with Alcoa's stock; every time the market's up, aluminum prices tend to be up and Alcoa's stock will be up, and then vice versa."
The cash (London Metal Exchange) aluminum price has dropped about 3.5% in December. The LME is the only market in the world that trades the commodity.
Alcoa has said in the past it expects increasing demand in China to offset declines in Europe.
But production has come down some 20% in China in the past few months, a trend that doesn't bode well for aluminum producers.
"People are talking about this hard landing versus soft landing in China -- what is the growth outlook in China really going to mean?" Freas said. "This is a rough period for any aluminum company."
Shares of the Pittsburgh-based aluminum producer fell 2.4% to $9.14 after German Chancellor Angela Merkel reiterated objections to a bigger European Stability Mechanism bailout fund.
Shares of the Dow component are down 37.4% in 2011 and have dropped 7.3% so far this month.
"We tend to see aluminum pricing move more closely with global economic sentiment rather than the true fundamentals of aluminum," Bridget Freas, Morningstar's aluminum analyst, said. "So we see the same thing happening with Alcoa's stock; every time the market's up, aluminum prices tend to be up and Alcoa's stock will be up, and then vice versa."
The cash (London Metal Exchange) aluminum price has dropped about 3.5% in December. The LME is the only market in the world that trades the commodity.
Alcoa has said in the past it expects increasing demand in China to offset declines in Europe.
But production has come down some 20% in China in the past few months, a trend that doesn't bode well for aluminum producers.
"People are talking about this hard landing versus soft landing in China -- what is the growth outlook in China really going to mean?" Freas said. "This is a rough period for any aluminum company."
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