Press Metal upbeat about aluminium market

Press Metal Group Bhd’s (Press Metal) chief executive officer Datuk Paul Koon gave reassurance that it was business as usual for the group and the outlook of the aluminium market remains upbeat.

RHB Research Institute Sdn Bhd (RHB Research) noted that as Press Metal’s share price plunged from an all-time high of RM7.46 to its low of RM5.32 over the last three trading days, the research house hosted a conference call for institutional investors to speak directly with Koon on the latest developments in the company and aluminium industry last Friday.

Koon confirmed that he was not aware of any bad news concerning Press Metal’s operations or the aluminium industry as a whole.

While he said that aluminum prices on the London Metal Exchange (LME) may have dipped after the spot price surpassed US$2,100 in August, he deemed the recent correction as healthy.

The premium paid over the LME cash price hit a record high, as the fourth quarter 2014 (4Q14) premium for the Japanese market was recently set at US$420.

Meanwhile, his bullish expectation of the aluminium market, on the back of capacity cuts over the past few years, moderate demand growth, and the absence of new smelting capacity outside China beyond the few facilities that are currently being ramped up, is in line with our investment thesis.

“We continue to like Press Metal, as it is a world-class low-cost smelter in the first quartile of a global cost curve, thanks to its competitive 25-year power purchase agreement (PPA), state-of-the-art smelting technology and strategic plant locations.

“The improved market dynamics are timely as its smelters have returned to optimum production levels. As we believe the recent selldown in its share price was not on a fundamental basis.”