Feb 3 (Reuters) - UBS raised its rating on U.S. aluminium producer Alcoa Inc to "buy" from "neutral," saying a recent correction in the stock price was overdone, and increased its aluminium price forecasts.
"Correction was warranted given fourth-quarter earnings were below market expectations, but we note that Alcoa became cash flow positive in the quarter and has made significant progress in cutting its costs," analyst Brian MacArthur wrote in a note to clients.
The analyst raised his commodity price forecasts to reflect resumption of China's materials-intensive growth cycle and re-stocking by traditional U.S. and European consumers.
MacArthur said he now expects 2010 aluminium price to increase to $1.15 per pound from 95 cents per pound.
"Our forecast of a 14 percent increase in aluminium consumption in the world, excluding China, in 2010 is significantly above consensus at 3 percent," he said.
Shares of Alcoa rose a percent to $13.85 before the bell Wednesday. They closed at $13.67 Tuesday on the New York Stock Exchange.
(Reporting by Arup Roychoudhury in Bangalore; Editing by Maju Samuel)
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