Alcoa Stock Fell to Record Lows amid Recession Fears

Alcoa stock fell to a record low on Wednesday. The stock has seen a selling spree this year. Alcoa stock has fallen to a record low since it was listed as a separate company in 2016.

Alcoa fell to record lows

On Wednesday, Alcoa (AA) stock fell to a record low since it became a separate company in 2016. The stock is trading sideways with a negative bias on Thursday. There has been a bloodbath in the entire metal and mining space. Notably, metals and mining stocks fell to their 52-week lows in May amid the escalating US-China trade war. However, there was some recovery in June and July as trade war fears subsided. So far, August has been another horrific month for Alcoa.

Chinese aluminum exports

Aluminum prices have fallen this month. From Alcoa’s perspective, even alumina prices have fallen. The fall in alumina prices isn’t surprising. The alumina-to-aluminum ratio was above its historical average. Now, alumina prices have retracted to more normalized levels. Meanwhile, China’s aluminum exports have fallen on a monthly basis for two months. However, China’s unwrought aluminum exports have risen 7.8% year-over-year in the first seven months of 2019. Higher Chinese aluminum exports usually depress aluminum prices.

Recession fears

A flurry of weak economic data raised recession fears. On Wednesday, the data showed a fall in Germany’s second-quarter GDP. China’s economic data was dismal. China’s industrial growth rate fell to multiyear lows. Metal and mining stocks like Alcoa are especially sensitive to China’s economic activity. President Trump’s tariffs aggravated China’s economic slowdown. With the yield curve inversion, we have the perfect recipe for bears. Falling automotive sales globally aren’t helping aluminum’s cause either. The automotive industry is among the biggest aluminum consumers. Car sales have fallen year-over-year for 13 consecutive months in China. The country is the largest automotive market. During the second-quarter earnings call, Alcoa lowered its 2019 aluminum demand forecast.

Analysts are bearish on Alcoa stock

Analysts have also been turning bearish on Alcoa stock. Last week, Citigroup lowered Alcoa’s target price from $26 to $22. Citigroup also lowered its target price in July. Jefferies lowered Alcoa’s target price from $23 to $20 last week.