Press Metal to look beyond temporary hiccups

Press Metal Bhd (Press Metal) will likely rebound from the myriad of setbacks faced this financial year 2015 (FY15) as RHB Research Institute Sdn Bhd (RHB Research) viewed the group to currently operate low-cost aluminium smelters in in the first quartile of the global cost curve.

At a visit to Press Metal’s smelting operations in Samalaju last Friday, RHB Research witnessed repair works at the group’s Phase II smelter which caught fire last month, and saw that things were well in progress with six pots energised at the point of visit.

According to the research house, management targets the plant to be back in full operation by end-third quarter of 2015 (3Q15).

“Separately, Press Metal also brought us to its Phase III expansion, with construction well into advanced stages despite works only starting from late 2014,” RHB Research said.

Some workers were seen busy installing machinery and smelting pots while others were continuing with civil works that the research house believed were at 70 per cent completion.

It was told the stage commissioning is still targeted to begin from November 2015.

RHB Research believed that Press Metal already runs successful aluminium smelters in Sarawak, which are in the first quartile of the global production cost curve.

“The company is now replicating its success via the construction of its Phase III plant, which would double its present aluminium smelting capacity in Samalaju, Sarawak,” the research house said.

RHB Research noted that together with its smelting plant in Mukah, the expansion could see the group expanding its smelting capacity to 760,000 tonnes per annum (tpa), which is about 1.5 per cent of global primary aluminium consumption.

Meanwhile, it said that London Metal Exchange (LME) aluminium prices and the physical premium paid on top of the LME rate by the rest of the world (ex-China) have continued to decline.

“However, management believed that prices may have bottomed out but the timing for a rebound is still unknown,” it added.

RHB Research believed Press Metal’s expansion plan is certainly timely for the group to ride on the potential bottoming out of aluminium prices and to expand its presence in the aluminium industry.

The research house has already projected record earnings for the company over coming years.