Credit Suisse analyst Curt woodworth has been downgraded Alcoa (NYSE): To Neutral From Outperform With a Price Target of $82.00 Per Share, Up from $67.00

Woodworth believes LME Aluminum prices are near their peak, with geopolitical tensions beginning to ease and having a less impact on the markets.

We believe that current geopolitical developments will continue to support aluminum prices in spite of the 2018 Rusal sanction. However, supply/demand balances should begin to normalize by 2H-22, Woodworth stated in a client letter.

Alcoa, on the other hand continues to face inflationary pressures.

Accelerated cost pressures for caustic soda, pitch & coke, as well as energy/power remain headwinds. COGS sees higher carbon/caustic costs flowing into COGS at lag. The impact is greater in the 2Q, when prices rise between $250 and 350/mt y/y. AA purchases a minimum of 1mt caustic each year. As new low-carbon technologies move closer to commercialization, AA will likely accelerate its capex. The analyst said that the impact of cost inflation and higher capex on FCF yield values is important given the valuation at the moment.

An analyst points out there have only been limited Western sanctions that were directed at Russia for its aluminum exports.

Alcoa shares are down 1.2% today, pre-open.

By Senad Karaahmetovic