Alcoa shares slip on worries about aluminum prices

NEW YORK (AP) -- Shares of Alcoa Inc. slipped Wednesday on worries about deteriorating aluminum prices.

THE SPARK: Deutsche Bank analyst Jorge Beristain cut his rating for the stock to "Sell" from "Hold," saying that aluminum prices are expected to fall in the next couple years, which will severely reduce profits for Alcoa.

THE BIG PICTURE: Alcoa has struggled in recent years amid the economic slowdown, which has prompted it to shutter smelters as it cuts back its capacity. But it's recently seen an uptick in demand, helped by stronger orders from the automotive and aerospace industries.

Last month, Alcoa was removed from the Dow Jones industrial average, in part because heavy manufacturing makes up a smaller share of the U.S. economy now than it did in the past.

THE ANALYSIS: Beristain, who also cut his price target by $3.50 to $5.50, said that if aluminum prices decline, Alcoa's primary metals operations could start losing money again, which could lead to the shutdowns of additional smelters.

THE SHARES: In morning trading, Alcoa shares fell 16 cents, or 2 percent, to $8.01 after dropping as low as $7.89 earlier in the session. Over the past 52 weeks, the shares have traded between $7.63 and $9.37. The stock started the session down about 5 percent since the start of the year.