Moody's Investors Service has downgraded New York based Alcoa Inc citing weak aluminium prices amidst global oversupply.

Moody’s said that it had lowered Alcoa's senior unsecured debt ratings to Ba1 from Baa3, which qualifies the company’s debt as junk in the fixed income world. The credit ratings agency highlighted however that the outlook for the miner was stable, indicating the rating would not be downgraded again soon.

Alcoa’s USD 8.6 billion debt quality has slipped six levels since 2002. Over that period, the company has lost its position as the world’s most valuable raw materials company to Australia’s BHP Billiton while Rio Tinto Group as well as Russian and Chinese aluminium producers increased their shares of the global aluminium market. In order to meet Moody’s criteria for investment grade with USD 3 billion of annual earnings before interest, taxes, depreciation and amortization, Alcoa would need to reduce its debt by USD 2.8 billion.

Alcoa is working to pay off debt and reduce costs by closing smelters, expanding profitable segments and finding ways to operate more efficiently. Helped by these measures, the group reported earlier this month that its Q1 profit had risen 59%.

Moody's had acknowledged Alcoa’s advance but said that key debt metrics were likely to fall short of investment grade standards through 2013 and 2014 in part because of weakness in the aluminium industry the group’s core business.

While pockets of strength are evidenced, most notably in the automotive and aerospace industries, these are not viewed sufficient for a broad-based global recovery in the aluminium industry and significant profitability recovery.