Press Metal expected to record double-digit y-o-y growth in 2Q24

KUCHING (July 18): Press Metal Aluminium Holdings Bhd (Press Metal) is expected to continue recording double-digit year-on-year (y-o-y) bottomline growth to continue in the second quarter of 2024 (2Q24), supported by an 11.5 per cent rise in aluminium average selling prices (ASPs), analysts say.

“We believe the narrowing surplus and increasing demand for aluminium will further drive up LME aluminium ASPs.

“Consequently, we expect strong growth momentum to continue into 2Q24, driven by higher ASPs,” RHB Investment Bank Bhd’s research team (RHB IB) said in a report.

“We expect double-digit y-o-y bottomline growth to continue in 2Q24, supported by an 11.5 per cent rise in aluminium ASPs and 28.7 per cent jump in Major Japan Port or MJP spot premiums due to rising Asian demand.

“On the raw materials side, alumina prices (circa 35 per cent of smelting costs) remain high amid tight supply at US$430.90 per tonne (25.1 per cent y-o-y). (US$1 = RM4.6657)

“Carbon anode prices have dropped 16.8 per cent y-o-y to CNY3,922.50 per tonne from CNY4,717.10 a year ago, according to Bloomberg. (CNY1 = RM0.642736)

“We expect net margins to hover around the low double-digits,” the research team added.

Bloomberg Intelligence forecasts a narrowing surplus and price uptick in aluminium through 2025.

It predicts the global aluminium surplus to shrink in 2024 and potentially shift to a deficit by 2025 on; slow capacity expansions in Indonesia, increased demand from green sectors like solar and EVs, and a rebound in construction activities outside China.

“The construction – which accounted for 22 per cent of global aluminium demand in 2023 – and transportation (the largest downstream segment at 28 per cent) sectors are pivotal to the demand recovery.

“This is supported by four per cent y-o-y growth in aluminium production in 5MFY24 based on International Aluminium Institute data.

“That said, global aluminium demand is projected to rise 3.2 per cent in 2024 and 2.4 per cent in 2025. Additionally, the US increased tariffs on Chinese aluminium imports from 7.5 per cent to 25 per cent, which may lead to higher LME aluminium prices too,” the research team said.

Overall, RHB IB revised its FY24F to FY26F LME aluminium spot prices to US$2,350, US$2,400, and US$2,500 per tonne.

It also noted that Press Metal hedged its aluminium ASPs as follows; 40 per cent at US$2,500 for FY24, 30 per cent at US$2,600 for FY25, and 25 per cent at US$2,700 for FY26.

“As a result, our earnings projections have increased by six to 18 per cent,” it added.

All in, RHB IB said: “We are optimistic about the aluminium market, driven by increasing demand from the EV and solar sectors, recovery of global trade activities, and increasing awareness towards lower-carbon footprints smelters.”