Press Metal feels the squeeze as aluminium supply tightness eases

Press Metal Aluminium Holdings Bhd is expected to face weaker smelting margins in the second half of 2026 as aluminium supply constraints ease, input costs rise and market sentiment shifts towards a potential surplus in 2027, according to Hong Leong Investment Bank (HLIB) Research. 

“The narrative now is increasingly shifting to a potential surplus in 2027. Coupled with falling Japan-Port (MJP) premium and rising alumina as well as carbon anode costs, we foresee sequentially weaker smelting margins in 2H2026,” the research house said in a note on Monday.

HLIB Research estimates that Press Metal’s core earnings for the third quarter of 2026 will range between MYR 600 million (USD 146.85 million) and MYR 650 million (USD 159.09 million), representing a decline of 10 per cent to 17 per cent quarter on quarter, although earnings would still rise 1 per cent to 9 per cent year on year. The expected results would bring the company’s nine-month earnings to approximately 75 per cent to 77 per cent of its full-year forecast. 

The projected quarterly decline reflects lower aluminium prices alongside higher raw material costs. Average spot London Metal Exchange (LME) aluminium prices are estimated at USD 3,228 per metric tonne in the third quarter, down from USD 3,564 per tonne in the second quarter of 2026. Average spot alumina prices have also increased, adding to the pressure on smelting margins.

Aluminium supply constraints begin to ease

The easing of supply tightness is linked to the gradual resumption of smelter operations in the Gulf, including Emirates Global Aluminium’s Al Taweelah facility, which restarted ahead of schedule. Rising exports from China and Indonesia are also contributing to the changing supply outlook.

Indonesia’s expanding production capacity could further influence the market balance. HLIB Research expects the country’s nameplate aluminium capacity to double from 2 million tonnes per annum in 2026 to more than 3 million tonnes per annum by 2027.

The combination of returning Gulf production and higher output from Asian suppliers has shifted attention towards the possibility of a market surplus next year. However, the potential surplus remains an outlook rather than a confirmed outcome. 

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Rising input costs add to margin pressures

While supply conditions are becoming less constrained, aluminium producers are also facing higher input costs. Alumina prices have risen since mid-October amid recovering downstream demand from the Middle East, according to HLIB Research.

Carbon anode prices have also climbed to a multi-year high of CNY6,000 (USD 898.47) per tonne, driven by elevated petroleum coke and coal-tar pitch costs. At the same time, the MJP premium has fallen sharply since late September, adding another factor to the changing economics of aluminium smelting. 

These developments have prompted HLIB Research to lower its earnings forecasts for Press Metal for the financial years ending December 31, 2026, 2027 and 2028 by 2 per cent, 10 per cent and 6 per cent, respectively. The revisions reflect lower assumed MJP premiums alongside higher alumina and carbon anode costs.

HLIB cuts target price but maintains hold rating 

HLIB Research has reduced its target price for Press Metal to MYR 7.44 (USD 1.82) from MYR 8.22 (USD 2.01) while maintaining its ‘hold’ rating.

The research house remains constructive on the company’s underlying fundamentals but sees a less supportive external environment and limited near-term catalysts for stronger earnings momentum.

“The external environment has turned increasingly unfavourable,” HLIB Research said, adding that “the lack of near-term earnings catalysts could limit rerating potential”.

The revised outlook places Press Metal among the aluminium producers facing a more challenging combination of market supply shifts and rising production costs, even as the industry adjusts to the gradual return of smelting capacity.

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