Oct. 6 (Bloomberg) -- Brazilian stocks headed for their biggest drop in a decade, led by declines for commodity producers, on concern the economic slowdown and global credit crisis are worsening.

Usinas Siderurgicas de Minas Gerais SA and Cia. Siderurgica Nacional SA sank more than 12 percent after UBS AG stripped the steelmakers of their ``buy'' ratings. Cia. Vale do Rio Doce fell the most ever as UBS cut its 2009 profit estimate by 32 percent. Petroleo Brasileiro SA dropped the most this decade as crude oil prices dipped below $90 a barrel. Rossi Residencial SA fell the most on the Bovespa after Goldman Sachs Group Inc. downgraded the homebuilding industry on concern that funding will slow.

``The risk for equities is really high and it's creating panic,'' said Valmir Celestino, who oversees the equivalent of $2.5 billion at Banco Safra de Investimentos in Sao Paulo. ``People are looking at the bailout plans and wondering if it's going to be enough and the fear of a deeper global recession is building.''

The Bovespa stock index fell 13 percent to 38,646.52 at 10:38 a.m. New York time. Trading was briefly halted after the index dropped more than 10 percent at the open. Brazil's real fell to the lowest level in almost two years.

Stocks tumbled around the world. The MSCI Emerging Markets Index slumped 8.2 percent, leaving it poised for the biggest slide ever. In latin America, Mexico's Bolsa slid 7 percent and Chile's Ipsa dropped 5.1 percent.

Steelmakers Drop

Usiminas paced declines for steelmakers, dropping 12 percent to 30.10 reais. CSN fell 18 percent to 29.36 reais. Brazil's second- and third-biggest steelmakers were lowered to ``neutral'' from ``buy'' at UBS.

Vale sank 13 percent to 25.17 reais, the most since at least January 1994. Iron ore prices may fall 15 percent in 2009, compared with an earlier estimate for a 10 percent increase, UBS said. In 2010, iron ore may fall another 15 percent, it said.

UBS lowered its price forecasts for copper, aluminum and most bulk commodities amid concern a slowing global economy will hurt demand from builders and automakers.

UBS pared its forecasts ``on the back of the deterioration in demand fundamentals experienced over the past quarter and the likelihood that this could continue over the next 12 months at least,'' analysts led by Daniel Brebner wrote in a report today.

Petrobras fell 11 percent to 27.45 reais. Crude oil for November delivery slid as much as $4.99 to $88.89 a barrel in electronic trading on the New York Mercantile Exchange.

Rossi Residencial fell 28 percent to 3.35 reais after Goldman Sachs cut the homebuilding industry to ``neutral'' from ``attractive.''

``The global financial crisis will slow Brazilian homebuilding, in our view, as funding becomes more scarce and expensive, and consumers turn cautious in taking on debt and drawing down savings, particularly if property values take a hit,'' analysts including Jason B. Mollin wrote in a note to clients today.

-- Editor: Allen Wan

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.

Last Updated: October 6, 2008 10:47 EDT