Press Metal unlocking potential amidst evolving market dynamics

KUCHING (Aug 30): Press Metal Aluminium Holdings Bhd (Press Metal) garnered RM511.3 million in core earnings for its second quarter of financial year 2023 (2QFY24), bringing the first half (1H) figure to RM931.5 million.

Analysts with RHB Investment Bank Bhd (RHB Research) consider this a slight miss as it expect a softer 2H24 due to margin pressures from high alumina costs.

It saw that Press Metal’s 1H24 revenue grew 10.9 per cent year on year (y-o-y), driven by stronger LME aluminium prices – averaging at US$2,522.80 and higher MJP spot premiums.

To note, its 1H24 core net margin improved by 3.6ppts on better smelting margins and a higher share of associates.

“Alumina prices remained elevated amid tight supply at US$430.90 per tonne,” RHB Research said yesterday. “In contrast, carbon anode prices have eased from the 2022 peak and stabilised at 3,922.50 yuan per tonne in 2Q24.

“We expect the uptrend in alumina costs to soften gradually as three new projects in Mempawah, Bintan, and Odisha are scheduled to come online between 4Q24 and 2026.”

Global aluminium prices recovered from the decline seen over the past few months, on the likelihood of rate cuts by the US Federal Reserve (by September).

MJP spot premiums are also seeing an uptrend, due to higher freight costs.

“We foresee demand for aluminium being buoyed by slow capacity expansion in Indonesia, and higher demand from green sectors like electric vehicles (EVs),” it added.

“While the LME aluminium price saw a brief dip in July, likely influenced by weaker macroeconomic data from China, we remain cautiously optimistic on the outlook.”

The team over at Kenanga Investment Bank Bhd (Kenanga Research) said China’s consumption of aluminium has thus far in 2024 surprised to the upside, while globally, demand for aluminium has been buoyed by renewable energy investments and EVs.

“Meanwhile, global aluminium supply will remain tight due to more stringent “green” requirements, especially in China, resulting in the permanent shutdown of smelters powered by fossil fuels (especially coal).

“It will also be affected by the sanctions on Russian producers by the West (Russia contributes to circa six per cent of world aluminium production), and higher tariffs on China imports by the US.”