UBS has downgraded Alcoa Corp. (NYSE: AA) from Buy to Neutral, citing a deteriorating outlook for alumina and concerns that the recent rally in Alcoa shares has left limited room for further upside.
In a note to clients, UBS analysts said they still hold a positive medium-term view on aluminum prices but expect alumina to remain under pressure for an extended period. “While aluminum fundamentals are constructive, alumina prices appear structurally weak for the near term,” the note said.
Alcoa shares have climbed roughly 30% from recent lows, a move UBS argues has outpaced improvements in the underlying commodity market. The firm now sees the stock’s 2026 valuation as balanced in terms of risk and reward, maintaining a price target of $31.
The analysts also expressed doubts about Alcoa’s potential to benefit from a possible rollback of U.S. tariffs. “Even if trade tensions ease, there’s no guarantee that Section 232 tariffs on aluminum imports will be changed in a way that helps Alcoa,” they said.
Further weighing on sentiment is the company’s San Ciprián facility in Spain. UBS noted that the smelter could post negative EBITDA between $70 million and $90 million and free cash flow losses of up to $120 million. Although restart efforts are underway, the bank warned that adding production capacity in a soft demand environment could further disrupt the European aluminum market.
While the San Ciprián refinery was cash-positive in the first quarter, falling alumina prices are expected to push it into negative cash flow starting in Q2. UBS believes a meaningful improvement in the facility’s financial performance is unlikely in the short term and that any progress toward breakeven at the smelter may be overshadowed by ongoing refinery losses.