Morgan Stanley upgrades Ivanhoe Mines, cuts Alcoa and Vale on metals outlook

Investing.com -- Morgan Stanley upgraded Ivanhoe Mines to "Overweight" while downgrading Alcoa and Vale to "Equal-weight", saying a changing supply outlook favors copper and precious metals over aluminum and iron ore. The brokerage expects copper, gold and silver prices to outperform, while forecasting aluminum will move into surplus and iron ore markets will remain under pressure.

Morgan Stanley raised its price target on Ivanhoe Mines to C$13.20 from C$12.00, citing an attractive entry point following the stock's prolonged underperformance after the Kakula mine's seismic disruption. It expects operational execution through 2026 and a positive mine plan update in early 2027 to support a rerating of the shares.

The brokerage cut Alcoa's rating after forecasting the global aluminum market will shift into surplus as Middle Eastern smelters restart production faster than expected and new supply comes online in Indonesia, Saudi Arabia, India and Angola. It lowered its aluminum price forecasts for 2027-28 by 11% to 13%, warning that Alcoa's high operating leverage could result in earnings estimates well below market expectations.

Morgan Stanley also downgraded Vale, citing weaker iron ore prices driven by expanding global supply surpluses, softer Chinese steel production and rising production costs. It now expects Vale's 2026 and 2027 earnings to fall below consensus forecasts, despite continued progress in the company's base metals business.

Across the broader mining sector, Morgan Stanley said copper remains its preferred commodity because of tightening supply and resilient demand, while it is constructive on gold, silver and uranium. It remains cautious on aluminum and iron ore as oversupply weighs on pricing, though it noted renewed geopolitical disruptions in the Middle East could temporarily support aluminum prices.

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