PETALING JAYA: Bullish fundamentals for aluminium will keep prices of the metal elevated and benefit companies like Press Metal
Aluminium Holdings Bhd, as suppliers seek alternative suppliers like the company.
Hong Leong Investment Bank (HLIB) Research stated the conflict in the Middle East has led to supply disruption concerns in the aluminium market, raising the likelihood of the global market shifting from a modest surplus of the metal in 2025 to a deficit in 2026.
As a result, aluminium prices have risen to above US$3,400 per tonne on the London Metal Exchange (LME) and up 11% since the start of the Iran war on Feb 28.
“We gather that smelters in the Middle East typically only hold one month of alumina raw material inventory. A disruption to the Strait of Hormuz lasting more than one month could result in a deficit of up to 2.29 million tonnes, driven by logistical constraints that effectively strand Gulf exports, with smelter restart cycles estimated at three to six months.
“In a severe scenario, where the strait remains closed for an extended period of more than a month, the deficit could widen to 2.76 million tonnes, with restart timelines potentially stretching to six to 12 months,” HLIB Research noted in its latest report on Press Metal.
Several major aluminium smelters in the Middle East have declared force majeure amid the ongoing disruptions. More capacity is at risk in the region. Markets, including the European Union and the United States, source aluminium from the region.
The research house noted geopolitical tensions and shipping risks in the Strait of Hormuz had prompted aluminium producers to delay second quarter offers with buyers adopting a wait-and-see stance amid heightened uncertainty.
“While premiums are likely to remain elevated in the near term, the current spike appears largely risk-driven rather than demand-led, and could moderate should supply disruptions ease,” HLIB Research warned.
It has thus upgraded Press Metal to a “buy” from hold with a target price of RM8.63 a share (RM7.64 earlier), valued at a price earning multiple of 25 times financial year 2026 (FY26) earnings per share.
HLIB Research noted the company had hedged around 65% of its aluminium output at US$2,750 to US$2,800 per tonne, providing earnings visibility, while the remaining unhedged volumes offer upside exposure to prevailing spot prices.
“We gather Press Metal is seeing an increase in orders from the Asia-Pacific region, as customers seek immediate replacements amid supply disruptions in the Middle East,” the research house stated.
HLIB Research had also raised its FY26 and FY27 earnings forecasts for Press Metal by 13% and 18.7% respectively, reflecting higher LME aluminium price assumptions, revised hedging position and stronger regional price premiums.
