NEW YORK (AP) — Moody's Investor Service said Tuesday that it may downgrade Alcoa Inc. because of a nearly 22 percent drop in aluminum prices in the past year. That could put the company's credit ratings in junk territory.
The ratings agency pegs Alcoa's senior unsecured rating at "Baa3," the lowest investment-grade rating. Its review affects about $8.6 billion of debt.
In October, Alcoa reported its second consecutive quarterly loss and lowered its aluminum-demand forecast for the rest of the year, largely because of China's economic slowdown. The New York-based company makes aluminum for a wide range of businesses.
Moody's said Tuesday that relatively weak economic conditions worldwide remain a concern.
"Europe's recession and sovereign-debt crisis, sluggish performance in the U.S. economy and slower growth in China are expected to continue to adversely impact the aluminum industry," Moody's said. "We do not see a material, sustainable improvement in aluminum prices over the next several quarters and expect Alcoa's earnings performance and debt protection metrics to remain challenged."
Alcoa said it has taken steps to reduce its net debt and trim near-term debt maturities. It expects its net debt to be between $6.8 billion and $7.1 billion at the end of 2012, down 30 percent from 2008 levels.
"Alcoa is committed to its investment-grade rating," spokeswoman Lori Lecker said.
Alcoa shares fell 16 cents, or 1.8 percent, to $8.75 in after-hours trading, after ending the regular session up 16 cents at $8.91. Through Tuesday's regular-session close, the stock had gained about 3 percent this year, compared with a gain of 15 percent in the benchmark S&P 500 index.