Metals Stocks Off Sharply on Euro Crisis

Investors sell off any and all shares linked to industrial metals Friday as the euro continues to sink.
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NEW YORK (TheStreet) -- Woe is the stock of any company linked to industrial metal, at least during the Friday trading session.

With the euro tanking and U.S. stocks following suit as Europe's debt crisis amplifies, the price of any metal not

called gold

has plunged. And so have the shares of miners, mining-equipment makers, steel producers and the shipping companies that carry the raw materials across the oceans.

The worries weighing on these shares are two-fold.

First, metals are mostly denominated in dollars, and as the greenback spikes against the plummeting euro, which fell to its lowest point in two years, the widening gap makes those commodities less appealing to investors. Sentiment has gone decidedly negative, with doomsday rhetoric entering the market. One trader at a large investoment firm was predicting that the euro would fall to $1.10 -- good for Americans traveling to Europe, bad for commodities.

Second, from a more fundamentally economic perspective, the roster of European countries taking on austerity measures to ease their burdensome debts has grown (see Portugal and Spain). This has given rise to the fear that the Continent will once again fall into recession.

Europe buys about 20% of the world's copper and 17% of its aluminum, observed Anthony Rizutto in a note to clients Friday morning, pointing up the importance of a healthy Europe to global metals demand.

Investors and corporate executives had been banking on recoveries in Europe and the U.S. According to the conventional wisdom, growth in the developed economies was to have offset what many predict as a slight economic slowdown this year in China, the world's most rapacious consumer of raw materials. China's economy has undergone such robust growth that its banking authorities have since the beginning of the year made moves to tighten credit in a bid to reduce the risk of asset bubbles.

About the only metals stock in the green Friday was fresh a IPO, the aluminum concern

Noranda

(NOR)

, spun out from the private-equity giant

Apollo Management

Friday. The company sold 10 million shares to the public at $8 apiece, a price that underwriters had slashed from last week's forecast of as much as $16.

According to one person whose firm was involved in the deal, Apollo and its underwriters feared that market uncertainty and continued volatility might have forced them to shelve the deal. Thus, they slashed the offering price in order to get it done. The result? They priced the issue too low, and Noranda shares spiked Friday once trading began in the name. It was moving most recently at $8.51.

Elsewhere, all was red. Shares of the world's biggest diversified miners,

BHP Billiton

(BHP) - Get Report

,

Vale

(VALE) - Get Report

and

Rio Tinto

(RTP)

, all were lower by about 4% in U.S. trading Friday.

Copper giant

Freeport McMoRan

(FCX) - Get Report

was falling 3.6%,

Alcoa

(AA) - Get Report

was down 3.3%, and Canada's

Teck Resources

(TCK)

was giving up 6.3%.

Mining-equipment makers

Bucyrus

(BUCY)

and

Joy Global

(JOYG)

were retreating by about 6% each. Multinational giant

Caterpillar

(CAT) - Get Report

, which will see its profit trimmed because of a stronger dollar, was declining 3% Friday.

Steel producers were hit as well, especially Europe's biggest such manufacturer,

ArcelorMittal

(MT) - Get Report

, whose shares were tumbling 6.8% Friday afternoon. Stateside steelmakers faired no better.

U.S. Steel

(X) - Get Report

, which benefited from a

bullish call

by

Goldman Sachs

(GS) - Get Report

on Thursday, was losing 6.4%, while

AK Steel

(AKS) - Get Report

was retreating by 4.3%.

Shares of dry bulk shippers, whose business is intimately tied to world trade in iron ore, coal and other raw materials, were also falling sharply Friday. Among the sector's larger-cap names, shares

DryShips

(DRYS) - Get Report

, which

reported its first quarter

earlier this week, were down 4.8%,

Diana Shipping

(DSX) - Get Report

was off 4.5% and

Genco Shipping & Trading

(GNK) - Get Report

nearly 7%.

-- Written by Scott Eden in New York

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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.