Press Metal witnesses positive growth as aluminium demand soars

A surge in demand for aluminium is augmenting the revenue accumulation of Press Metal Aluminium Holdings Bhd, giving the company the best benefits of a structural demand shift in Malaysia's economy, as was noted by the country's indigenous research lobby, RHB.

A company statement said: "We expect the current supply tightness caused by the continued Russia-Ukraine war, the matured stage of the monetary cycle, and the reopening of China's economy to continue lending support to aluminium prices."

RHB states that despite a subtle topline growth in Q4 2022 to 1 per cent Y-o-Y considering the linear aluminium prices, core earnings should spike to 16 per cent owing to the reducing alumina price.

In January, the average alumina-to-alumina cost proportion halted at 13.8 per cent, widely retaining the numbers acquired in Q4 2022.

Anyhow, carbon anode prices decreased by 7 per cent to an average spot price of RMB 6,540 per tonne in the first month of 2023 versus the logged price in Q4 2022, which was RMB 7,040 per tonne.

RHB reduced its 2022 earnings projection by 10 per cent while updating its forecasts due to the plunging premium assumption.

Anyhow, RHB up-scaled 2023-2024 earnings by 6 per cent and 9 per cent, respectively, keeping in mind the rebound in aluminium prices duped with a feasible cost ratio. 

The research body also stated that the 2023 aluminium price forecast was recalculated to be US$2,600 per tonne from US$2,400 per tonne, with each US$50 appreciation heightening Press Metal's earnings by 4 per cent.

Also, it has been confirmed that reopening China's gates have hiked LME prices to US$2,600 per tonne, keeping its average price circulating between US$2,400 per tonne to US$2,500 per tonne in December 2022.

"We expect Press Metal's timely shift to hedge 35% of its forward sales in 2023 (from 60% in 2022) to accord it with ample upside from the strengthening of aluminium prices," the RHB notification said.