Copper looks better than aluminum medium-term, says JPMorgan as it downgrades Alcoa

By Jules Rimmer

While both industrial metals have performed robustly of late, the threat of incremental supply poses downside risk for aluminum, analyst says

Industrial metals have benefited from supply disruptions, a weak dollar and robust demand

The copper rally is likely to continue but the gains for aluminum are more at risk, said a top Wall Street bank as it downgraded producer Alcoa.

Copper (HG00) is surfing close to an all-time high, having recently pierced $6 per pound. Aluminum recently exceeded $3,000 per metric ton, the highest since spring 2022.

While both metals have benefited from robust demand, a weaker dollar and supply disruptions, JPMorgan thinks the narrative around copper is more compelling. This preference, and valuation concerns, has persuaded its metals and mining team to reiterate an overweight call on Freeport-McMoRan (FCX), the Phoenix copper producer while downgrading Alcoa (AA), the Pittsburgh aluminum producer, to underweight from neutral.

Indexed Base Metals Stocks vs. Commodities

In a report published Thursday by its base metals team, Bill Peterson, Bennett Moore and Mahima Kakani, JPMorgan also highlighted Ivanhoe Electric (IE) for small and mid-cap investors as an overweight recommendation with a potential positive catalyst in the offing in early 2026 when the final investment decision will be made on its Santa Cruz project. Meanwhile a neutral call on Teck (TECK) is maintained while the analysts await updates on its ambitious Quebradas Blanca Phase 2 project.

Given the strength of the underlying commodity and its 11% jump over the past month, the 16% rally in copper stocks over that period doesn't surprise the JPMorgan team but Alcoa's 41% boom has far outpaced that of aluminum which is only up 7%.

In the near-term, although the analyst trio expect both industrial metals to continue rising, they anticipate surpluses in aluminum later on in the year as the market discounts the fresh 1.5 million tons of supply per annum emanating from Indonesia. This gives aluminum prices downside risk, the researchers believe.

The report scrutinizes the Trump administration's tariffs on industrial metals, imposed under the International Emergency Economic Powers Act, and reckons that if the U.S. Supreme Court rescinds them, the government may use Section 232 tariffs instead. This could negatively impact Alcoa's tariff reprieves on its Canadian aluminum.

While the specter of additional Venezuelan aluminum supply is topical at present, JPMorgan believe incremental production gains are so far down the road there is no immediate effect to be incorporated.

With fourth-quarter numbers due imminently, the report upgrades target prices on Freeport McMoRan from $58 to $68, on Alcoa from $45 to $50, on Ivanhoe Electric from $18 to $22 while leaving Teck unaltered at $72.

-Jules Rimmer

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