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Why Shares of Constellium, ArcelorMittal, and Olin All Dropped Today

By Rich Smith - Mar 5, 2020 at 7:50PM

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It's the coronavirus. Yes, again.

What happened

Aluminum, steel, caustic soda: three commodities that can't possibly be affected by a virus, right?

Yet the stocks of Constellium SE (CSTM 13.81%), ArcelorMittal (MT 2.62%), and Olin (OLN 3.00%) were all down steeply today, off 14.6%, 8.6%, and 10.4%, respectively, at the close of trading. And each of these commodity stocks is seeing its share price fall today for one reason: the COVID-19 coronavirus.

Blue world map with China in red, word CORONAVIRUS and vectors leading away from China

Image source: Getty Images.

So what

Workers quarantined away from their factories can't manufacture products for sale. They also can't earn wages with which to purchase products manufactured by somebody else. And decreases in demand for end products manufactured from aluminum and steel (like cars, for example) lead to decreases in demand for the commodities that are used to manufacture such end products. So, aluminum, steel, and caustic chemicals are not really "immune" to the coronavirus, just as the workers who operate the plants where these products are manufactured are not.

Now what

This is how the coronavirus is starting to make itself felt in sectors of the economy (and sectors of the stock market) where you might not ordinarily expect to find it.

Around the world, countries -- and companies -- are restricting travel. Some companies are closing stores and factories. Others are just telling workers to work from home. The total effect of the actions being taken to contain the virus' spread, however, is to apply brakes to the world economy.  

That's not good news for commodity stocks, or any stocks, really.

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Stocks Mentioned

ArcelorMittal Stock Quote
$23.92 (2.62%) $0.61
Olin Corporation Stock Quote
Olin Corporation
$46.66 (3.00%) $1.36
Constellium N.V Stock Quote
Constellium N.V
$13.60 (13.81%) $1.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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