Has Alcoa (NYSE:AA) Climbed As High As it Can Go?

Making a big move from August by rising almost 40 percent, questions are arising concerning Alcoa (NYSE:AA) and whether or not they have peaked in light of the demand for aluminum.

Consequently, BMO Capital has downgraded Alcoa from "Outperform" to "Market Perform," with analyst Tony Robson saying they're approaching his target price of $14 a share.

Robson also rightly noted that aluminum is probably the least enticing of commodity metals, saying they're the "least preferred commodity."

Contradicting assertions on supply and demand balance from Alcoa, Robson added that the believes there will be a surplus of aluminum, and the increasing size of inventories could drive aluminum prices down.

He also noted that Alcoa's nod toward Asian markets and China driving aluminum demand isn't convincing as it relates to them, as their smelters are a long way away, implying higher costs.

Alcoa also recently talked about eventual emergence of aluminum ETFs, but they haven't been part of negotiations yet, and haven't been invited to be. Rusal has been the major point of contact and beneficiary of that new aluminum market, not Alcoa.

So while there are some positive things to look for concerning aluminum in the long term, Alcoa will struggle to make them generate revenue and profits in the near term, and possibly for several years out.

If someone wants to stay in the aluminum play, Robson recommended moving to Rio Tinto (NYSE:RIO).

Alcoa closed Thursday at $13.81, down by $0.07, or 0.50 percent.