PETALING JAYA: Press Metal
Aluminium Holdings Bhd is seen to be a key proxy of the sustainable low-carbon producing aluminium smelters, says RHB Research.
This is amid the global decarbonisation efforts in limiting coal-based smelters and the current tight supply in the industry, the research house said in a recent report to its clients.
“We still like our sector’s top pick, Press Metal for its capacity driven earnings upcycle with three-year forward earnings compounded annual growth rate (CAGR) of 26% from 2021. “The group’s proactive hedging policy should also provide some average selling price protection amid the softness in London Metal Exchange (LME) prices,” the research house noted.
To put into perspective, the LME inventory recorded 332,175 tonnes as at end-September from 939,200 tonnes at the beginning of the year.
The low inventory level is likely attributed to the potential slowing down in demand, such as the zero-Covid policy in China which has negatively impacted demand for aluminium and production cut from the European region.
Taking cue from August production numbers, RHB Research noted that global aluminium production recorded its fastest growth in 2022 at 3.8%.
“We believe the current tight supply coincides with the supply cut from Eastern Europe due to high input cost, while a potential ban on Russia’s metals would continue to pose a threat towards the current tight inventory level, and in turn, be positive for aluminium prices,” it said.
The LME aluminium prices have plunged to a low of US$2,155 (RM10,133) per tonne from its peak of US$3,878 (RM18,234) per tonne in March, representing a 44% correction.
“We expect the near term softness of LME aluminium prices to be capped by the current industry tight supply despite expectations that the persistent hawkish tone by the US Federal Reserve will weigh in on LME prices in the near term,” the research house pointed out.
