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Big China metals and mining firm Chinalco is putting over $19 billion into Rio Tinto (NYSE: RTP) which is in many of the same businesses. According to MarketWatch, "The investment by the state-owned company, known as Chinalco, would be the largest-ever foreign corporate investment by a Chinese company."
About $1 billion of the cash will be used to buy Rio Tinto shares held by Alcoa (NYSE: AA). Does the China deal put Alcoa in play? It may.
Metal assets have fallen sharply in value as global commodity prices have collapsed due to the recession. This has caused metal stocks to lose a great deal of their value. Alcoa shares are down from a 52-week high of $44.77 to $7.71.
China can afford to buy and hold shares in companies with assets that will appreciate over time. Once the economy begins to recover and demand for metals rises in industries from construction to automotive, the stocks in companies like Alcoa should move back up toward the levels where they traded over a year ago.
Alcoa's asset may be "on sale" now. That makes it a tempting target.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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