Thursday, May 27, 2010

Alcoa (NYSE:AA) Upgraded by Macquarie, Aluminum Prices Should Rise

In case you missed it yesterday, Alcoa (NYSE:AA) was upgraded by Macquarie Research from "neutral" to "outperform." Alcoa has been hit hard since the beginning of the year, dropping by about 30 percent. Much of that based on falling demand and falling aluminum prices.

Macquarie analyst Curt Woodworth believes the aluminum sector was over-corrected. He said, "We believe the aluminum market is more healthy than most investors realize as physical premiums continue to move higher and demand growth is accelerating."

Woodworth raised his price target for Alcoa from $17 to $18 also, saying they specifically have been oversold, as has much of the entire aluminum industry.

Physical premiums for aluminium in Europe are at their highest in decades, and in Japan and the U.S. they have climbed to their highest levels in five years.

If you add in the increased demand expected to rise because of several aluminum ETFs which are scheduled to launch in the latter part of 2010, and you have pretty good conditions for the aluminum industry to rebound nicely.

We have to of course keep in mind the conditions in Europe and China, but if things go relatively okay there, it could be a good several years for aluminum, although in regards to Europe, that is a big "if."

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