Low-carbon aluminium smelters proxy by Press Metal: RHB Research

The market research and analysis wing of RHB Malaysia, RHB Research, states that Press Metal Aluminium Holdings Bhd is a vital proxy of sustainable low-carbon producing aluminium smelters.

In a recent report to its clients, the research agency said, "This is amid the global decarbonization efforts in limiting coal-fired energy-supplied smelters and the current short supply in the industry."

"We still like our sector's top pick, Press Metal, for its capacity-driven earnings upcycle with three-year forward earnings compounded annual growth rate (CAGR) of 26% from 2021. The group's proactive hedging policy should also provide some average selling price protection amid the softness in London Metal Exchange (LME) prices."

According to the LME inventory report at the end of September, there were 332,175 tonnes on hand compared to 939,200 tons at the beginning of the year.

A possible slowdown in demand, such as China's zero-Covid policy, has likely contributed to the low inventory level and production cuts in Europe. In August, RHB Research reported that global aluminium production increased by 3.8%.

RBH said, "Currently, tight inventories coincide with supply cuts from Eastern Europe due to high input costs, while a potential ban on Russian metals would further threaten the current tight inventory level, resulting in higher aluminium prices."

"In the near term, we expect LME aluminium prices to remain soft due to the industry's tight supply despite the persistent hawkish tone of the Federal Reserve in the near term."