Press Metal sees strong 2026 aluminium market, but 2027 brings fresh supply concerns

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Press Metal Aluminium Holdings is still benefiting from a tight aluminium market in 2026, but cooling prices and a potential supply surplus in 2027 are making the outlook more balanced.

The aluminium rally that helped lift expectations for Press Metal Aluminium Holdings Bhd is beginning to lose some of its momentum.

Hong Leong Investment Bank (HLIB) remains positive about the company's underlying fundamentals but believes much of Press Metal's benefit from elevated aluminium prices has already been reflected in the market. With aluminium prices now easing and the market potentially moving into surplus next year, the risk-reward picture is becoming less one-sided.

HLIB has therefore retained its 'Hold' rating on Press Metal while lowering its target price to MYR 8.34 from MYR 8.77.

Aluminium prices retreat from USD 3,800 peak 

The biggest change for Press Metal has been the movement in aluminium prices.

Following the initial US-Iran peace deal, LME aluminium prices came under pressure, falling from a recent peak of around USD 3,800 per tonne to approximately USD 3,200 per tonne.

HLIB expects prices to remain relatively steady from here, although the market is already looking beyond the current supply deficit towards a potentially more balanced 2027.

The aluminium market is expected to remain in a deficit of around 2 million tonnes throughout 2026, partly because conflict-related disruptions removed approximately 3 million tonnes of supply from the market.

That tightness has supported aluminium prices and, in turn, benefited producers such as Press Metal.

But the situation could look quite different next year.

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2027 could bring a wave of new aluminium supply

HLIB expects the aluminium market to increasingly price in a surplus for 2027 as new production comes online.

Around 2 million to 3 million tonnes of new aluminium supply is expected from Indonesia and India, while aluminium smelters in the Middle East could gradually resume production and add further supply to the market.

That potential increase in availability is one reason HLIB has become more cautious about Press Metal's earnings outlook.

The bank cut its aluminium price assumptions and subsequently reduced its Press Metal forecasts by 5 per cent for FY26, 2 per cent for FY27 and 3 per cent for FY28.

Still, the outlook isn't exactly gloomy.

Press Metal could still deliver a strong 2026

Despite the cooling aluminium market, Press Metal is expected to post strong earnings in the near term.

HLIB estimates the company's second-quarter 2026 core earnings could come in between MYR 750 million and MYR 800 million.

That would bring Press Metal's first-half 2026 core earnings to approximately MYR 1.357 billion - MYR 1.407 billion, representing growth of around 39 per cent to 45 per cent year on year.

The estimate would also account for around 47 per cent to 49 per cent of HLIB's FY26 earnings forecast.

In other words, the current aluminium environment is still giving Press Metal plenty of support. The bigger question is whether those favourable conditions can continue once additional global capacity starts coming back online.

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Alumina remains supportive for smelting margins

There is another factor working in Press Metal's favour: relatively low alumina prices.

According to HLIB, citing S&P Global, LME alumina prices remained subdued at slightly above USD 300 per tonne.

For aluminium smelters, cheaper alumina can help keep production margins healthy because alumina is the key raw material used to produce primary aluminium.

HLIB believes alumina prices may also be approaching a floor. Potential bauxite export controls in Guinea, aluminium capacity expansion in Indonesia and a gradual recovery in Middle Eastern aluminium consumption could provide some support to the alumina market.

The aluminium market still has a floor – for now

The company is still benefiting from a 2026 aluminium supply deficit, healthy smelting margins and strong expected earnings. But the market is already preparing for a different environment in 2027, when new capacity from Indonesia and India and the return of Middle Eastern production could push aluminium supply higher.

The Strait of Hormuz situation and uncertainty around US Federal Reserve policy could also continue to influence aluminium and other base-metal prices.

HLIB expects these factors, alongside the 2026 supply deficit, to provide some support for aluminium prices in the near term.

Press Metal was trading at MYR 7.87 at the time of the report, below HLIB's revised MYR 8.34 target price.

For now, the message is less about aluminium's rally being over and more about the market asking a new question: how long can the current supply tightness last before the next wave of aluminium arrives?

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