PETALING JAYA: Further upside could still be on the cards for Press Metal
Aluminium Holdings Bhd despite its strong year-to-date (y-t-d) rally, underpinned by tightening global aluminium supply and rising prices.
RHB Research lifted its aluminium price assumptions on the London Metal Exchange to US$3,150 (RM12,488) to US$3,250 per tonne for financial year 2026 (FY26) to FY27, from US$2,850 to US$2,950 previously, reflecting tightening supply conditions.
A key driver of this supply squeeze stems from disruptions in the Middle East.
“Despite Press Metal’s stellar share price performance y-t-d, we believe there is still ample room for upside, underpinned by a structural market deficit,” it said.
“This imbalance is expected to drive earnings growth in FY26 to FY27.”
RHB Research maintained its “buy” call on the stock while raising its target price to RM10.50 from RM8.50, implying about 20% upside, with modest yields of around 1%.
It noted that recent alumina cargo sales by Emirates Global Aluminium could indicate inventory reallocation and risk of prolonged smelter downtime.
“This may further tighten aluminium supply.”
While a reopening of the Strait of Hormuz following a ceasefire could ease logistics constraints, RHB Research cautioned recovery may be gradual, with potential port congestion and bottlenecks.
The strait accounts for more than 20% of global alumina imports, and shipments into the Middle East plunged 63% year-on-year in March.
Restarting idled smelters is also neither quick nor cheap.
It highlighted that a full recovery of Venezuela’s Venalum smelter could cost US$1bil to US$1.5bil, while Spain’s San Ciprian facility incurred losses of up to US$110mil during a 12 to 17 month restart period.
These examples underscored the structural constraints on supply, which could sustain elevated aluminium prices.
Indeed, LME aluminium prices are near their historical highs, exceeding levels seen during the Russia-Ukraine War.
Meanwhile, Main Japanese Port premiums have climbed 62% since before the Middle East conflict to US$300 per tonne, the highest in 11 years on tight physical supply.
RHB Research said it has raised its FY26 to FY28 earnings forecasts for Press Metal by 8% to 10% after factoring in higher aluminium prices and premiums.
Its valuation, which includes an environmental, social and governance premium, implies a level two standard deviations above its historical averages – a premium the research house said is justified, given what it noted is a new normal of elevated prices.
“Key risks include a sharp decline in aluminium prices, global economic disruptions, and rising raw material costs,” it added.
