NEW YORK (TheStreet) -- Metal and mining stocks fell sharply Tuesday, pacing the broader market into negative territory, as jittery investors once again chose to flee anything cyclical after Monday's surge.
The questions, fears and uncertainties remain the same for metals players: To what extent will the debt crisis in Europe impede economic recovery the world over? And to what extent has the newest data from China -- higher than expected inflation of 2.8% -- provided even more reason for banking officials in the People's Republic to tighten lending further?
Gold: A Portfolio Must
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Both variables (Europe, China) have cast a cloud over future demand for industrial metals, from copper to iron ore -- this despite the fact that April data from China shows that the country's steel industry once again notched an all-time record in terms of output, suggesting that its consumption of iron ore, at least, has not abated.
Some market observers have already declared Shanghai-listed equities to be in a bear market. Add in ongoing worries about
, which would take a 40% cut of all mineral- and energy-extraction profits Down Under, and you have a recipe for profit-taking.
"Given the kind of nervousness around, it wouldn't surprise me if the market was down over the next few weeks," said one metals-sector analyst.
Among the Australian behemoths, the American depositary receipts of
were declining 3.3% to $67.89, while rival and would-be joint venture partner
was falling nearly 4% to $47.89.
Early Monday, BHP boss Marius Kloppers continued to lobby hard against the proposed tax, saying that the expansion of the company's big Olympic Dam mine in Australia could be jeopardized by the bite out of its profits the tax would take.
Back in North America, shares of iron-ore miner
Cliffs Natural Resources
were sliding 5.7% to $57.72, while Canadian giant
saw its U.S.-listed stock fall 3.2% to $37.28.
stock was down 2.7% to $12.25. Coal miners
were retreating by 6% and 2.4%, respectively.
meanwhile, embroiled in the mine-disaster scandal and federal investigation, were slipping 1% to $35.44.
Peabody recently announced that it would cut its buyout price for the Aussie coal producer Macarthur Coal by one Australian dollar per share. It blamed the reduced valuation on the tax overhang.
Still, the tax could mean good things for investors in physical base metals. Explained Dahlman Rose stock analyst Anthony Rizzuto in a note to clients Tuesday morning, "If miners do pull back aggressively from Australia, it may create additional tightness in the commodity supply chain over the medium to longer-term, pushing prices higher in many of the metals and minerals that we track. "
were down 1.5% to $71.42. The copper giant's substantial exposure to gold likely helped support its stock price Tuesday.
As investors fled cyclical and risk in generally, they moved into safe havens, including the yellow metal, as
gold prices spiked higher
again on Tuesday, driving gold-mining stocks sharply higher across the board. Among the majors, shares
were all gaining 5% or more.
-- Written by Scott Eden in New York
Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.