UOBKH foresees supply disruptions due to China’s production cap, the removal of VAT rebates and the US tariffs.
PETALING JAYA: UOB Kay Hian Research (UOBKH Research) expects Press Metal
Aluminium Holdings Bhd’s growth this year to be fuelled by ongoing supply constraints and falling raw material costs.
Should aluminium prices swing from its conservative forecast, the research house said, “Based on our sensitivity analysis, every US$100 per tonne increase to our current spot aluminium price assumption of US$2,450 per tonne in 2025 would increase Press Metal’s earnings by 14% annually.”
“Within China, the 45.5 million-tonne production cap and removal of value-added tax (VAT) rebates on over five million tonnes of aluminium exports further restrict output and exports.
“In addition, the United States recently reinstated and raised tariffs to 50% on all aluminium imports, tightening trade flows and underscoring a broader trend of deglobalisation that will likely exacerbate global supply-side pressures,” the research house noted.
While the aluminium demand is likely to remain subdued in the near term, the research house foresees supply disruptions due to China’s production cap, the removal of VAT rebates and the US tariffs.
Given a tighter supply condition, UOBKH Research has maintained a conservative London Metal Exchange aluminium price assumption of US$2,450 per tonne for this year versus US$2,400 per tonne in 2024.
“As of May 25, Press Metal had hedged 60% of its aluminium prices at US$2,600 per tonne for this year, 40% at US$2,700 per tonne for next year, and 35% at US$2,700 per tonne for 2027.”
According to UOBKH Research, the key growth drivers for Press Metal this year include the commencement of new alumina refineries in Indonesia by its 21.75%-owned Hong Kong unit Nanshan Aluminium International Holdings Ltd, lower alumina input costs and the expansion of value-added products volume as well as the ongoing supply constraints in aluminium production.
Furthermore, it has also maintained a “buy” call on the stock with a target price of RM6.26 per share.
