The world's largest mining group BHP Billiton has reportedly abandoned interest in buying aluminium giant Alcoa despite global speculation that it was mulling a bid of between $40-billion and $50 billion.

The Australian reported on Friday that Alcoa's shares plunged after BHP Billiton's "bid evaporates". This followed a report that Alcoa, the world's second largest aluminium producer, was "no longer a target of interest" for Melbourne-based BHP Billiton.

Shares in Alcoa fell $1.83, or 3.9 percent, to $44.62 in afternoon trade on the New York Stock Exchange on Thursday, having gained 55 percent this year amid speculation that the New York-based company was a takeover target.

Speculation over BHP Billiton's plans to make an offer for Alcoa was rife last week ahead of diversified mining company Rio Tinto's $38.1-billion bid for Canadian Aluminium producer Alcan.

Alcoa shelved its $27-billion hostile bid to buy rival Alcan last week after Alcan's management agreed to a richer takeover offer.

Market speculation was fuelled by BHP Billiton's appointment of Merrill Lynch to make an assessment of Alcan, and possibly Alcoa, as well as reports carried by London daily The Times that declared that BHP Billiton was courting private equity firms over a possible $40-billion bid for Alcoa.

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On Monday this week, the Australian daily said BHP Billiton was expected to decide on whether or not it will bid for Alcoa within the next two weeks.

It also said BHP Billiton may have to offer a premium of up to 30 percent for Alcoa, which could have pushed the price up to $50-billion.

According to Dow Jones, a US fund manager who holds Alcoa stock said he believed parties associated with BHP were now talking down the possibility of a bid in order to lower the price they will ultimately have to pay for the aluminum giant.

Morgan Stanley analyst Craig Campbell was also quoted by Dow Jones as saying that while a BHP Billiton bid for Alcoa remains a possibility at the right price, there was no pressing need for the company to act now. "It wouldn't surprise me if they left it," he said.

BHP Billiton continues to decline comment, saying it is company policy not comment on market speculation.