Aluminum producer Alcoa could have could struggle going forward as commodity prices that have run up as a result of the war in Ukraine begin peaking, according to Credit Suisse. Credit Suisse downgraded Alcoa to a neutral rating from outperform. The firm raised its price target on the stock to $82 per share from $68. The new projection is 4.8% lower than Thursday's closing price. "While we see current geopolitical events as driving lasting structural support for aluminum prices ... we do believe supply / demand balances will start to normalize in 2H-22 as trade flows are gradually realigned, off-warrant material is monetized, and smelter operating rates sharply recover in China," Credit Suisse's Curt Woodworth said in a note Friday. The Russia-Ukraine conflict has driven prices of key commodities higher this year, as investors worry about the war leading to global supply shortages. Aluminum prices are up about 20% this year. Credit Suisse noted there have been limited direct sanctions on Russia's aluminum exports, though self-sanctioning actions from Russia could impact supply in the medium term. "As geopolitical tensions start to moderate, we would expect some scarcity premium to come out of the market," Woodworth said. And while higher aluminum prices are a positive for Alcoa, the company also battles inflation in other areas. "While AA is surely a major beneficiary from the current bullish price trends in aluminum/alumina, they do face increased inflationary pressures in caustic soda and carbon," Woodworth said. Alcoa is up 44.5% in the 2022, but down about 5% this week. —CNBC's Michael Bloom contributed reporting.
An Alcoa aluminum plant in Alcoa, Tennessee
Wade Payne | Reuters
Aluminum producer Alcoa could have could struggle going forward as commodity prices that have run up as a result of the war in Ukraine begin peaking, according to Credit Suisse.