Aluminium margins improve as alumina costs slide, says RHB

RHB Investment Bank Bhd (RHB Research) has reaffirmed its OVERWEIGHT rating on the Basic Materials sector, placing Press Metal Aluminium Holdings (PMAH) as its top pick amid improving fundamentals for aluminium smelters.

The research house is optimistic about the sector’s trajectory, supported by falling input costs, stable demand, and tight global supply even as US-imposed tariffs inject some uncertainty.

Aluminium prices on the London Metal Exchange (LME) have shown resilience, rebounding to around USD2,600 per tonne after dipping to USD2,300 in April post-tariffs. RHB expects aluminium prices to remain firm over the next three years, underpinned by capped output in China and energy-related delays in European smelter expansions.

A key driver of improved margins for producers like PMAH, is the sharp drop in alumina prices, which have fallen 46 per cent year-to-date. Alumina now makes up just 14 per cent of LME aluminium pricing, down from a peak of 31 per cent in December 2024, thanks to easing supply chain constraints in Guinea. This trend favours integrated producers, especially PMAH, which plans to meet 99 per cent of its alumina needs through its upcoming Indonesian refinery by 2027.

Despite a 23 per cent rise in carbon anode costs due to petroleum coke disruptions, RHB believes the overall impact on smelting margins will be limited, given the lower weight of anodes in total production costs. PMAH’s risk exposure is also cushioned by steady hedging: 60 per cent of 2025 output is secured at USD2,600, with similar strategies in place for 2026 and 2027.

With easing cost pressures, strategic self-sufficiency moves, and resilient pricing, aluminium players like PMAH appear well-positioned to weather global headwinds and capture long-term growth opportunities.

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