PETALING JAYA: A potential structural deficit in aluminium following the Middle East conflict bodes well for Press Metal
Aluminium Holdings Bhd, while easing global coal prices could result in a margin recovery for Malayan Cement Bhd from the second quarter of financial year 2027 (2Q27), says RHB Research.
The research house – which kept an “overweight” stance on the basic materials sector – said both Press Metal and Malayan Cement were its top stock picks within the industry, noting that the valuations remained attractive despite the current uncertainties.
In a note to clients, RHB Research said aluminium prices are approaching pre-conflict levels amid ongoing peace talks between the United States and Iran, leading to a gradual reopening of the Strait of Hormuz.
According to RHB Research, Press Metal remains its top pick due to the aluminium structural deficit, which is expected to persist in the near term.
The year-to-date average aluminium price is US$3,333 per tonne, which is 3% above the research house’s estimate.
“We think this warrants a re-rating for Press Metal, pushing the valuation higher than the mean.
“Press Metal’s recent sell-off also presents an opportunity to accumulate in our view, as our structural deficit thesis remains intact, further underpinned by the company’s favourable hedging position,” added RHB Research.
It noted the aluminium market is expected to remain in a structural deficit, widening deficit estimates to two million tonnes to three million tonnes in 2026, and one million tonnes in 2027 compared with approximately 600,000 tonnes pre-conflict.
As such, assuming a “forever peace” scenario, the research house still expects aluminium prices to remain above the US$3,000 per tonne mark in the near to mid-term.
Overall, RHB Research has trimmed its FY26 to FY27 earnings forecasts on Press Metal by 3% and 5%, while keeping the FY28 estimates relatively unchanged after lowering its aluminium assumption and factoring in slightly increased carbon anode costs.
The research house maintained a “buy” call on Press Metal with a target price of RM7.80 per share.
On Malayan Cement’s outlook, RHB Research noted that Newcastle coal prices have gradually eased amid peace deals between the United States and Iran.
Coal prices are now at US$129 per tonne (down 15% in four weeks), trailing the 16% drop in crude oil prices.
As the two commodities are closely correlated, the research house said it expects coal prices to gradually approach pre-war levels, though Malayan Cement has secured its 1Q27 (June) coal inventory at approximately US$90 per tonne (38% above the 3Q26 level).
“Assuming coal prices continue easing in the second half of 2026 (2H26), we should see a margin recovery for Malayan Cement from 2Q27 onwards – though this may be offset by the Indonesian government’s control of exports and a potential increase in coal demand driven by hot weather in South-East Asia.”
During RHB Research’s latest briefing with Malayan Cement, the management guided that the recent increase in Indonesia’s coal prices was largely driven by changes in Indonesia’s policy to centralise coal exports to the newly established state entity Danantara Sumberdaya, which is set to be fully implemented from 2027.
Although Malayan Cement is currently buying from Indonesia government-related entities, the research house said it may see higher overall costs, given the expectation of an overall reduction in coal output in the country.
Malayan Cement has kept its RM20 per tonne rebate unchanged for now, and management hinted that overall average selling prices (ASPs) may be maintained in the near term.
“Based on our estimates, every RM10 per tonne increase in ASPs will raise Malayan Cement’s earnings by 6% to 8% per annum.
“However, we remain largely positive on its cost-control initiatives, as its earnings before interest, taxes, depreciation and amortisation margins enjoyed a quarter- on-quarter uptick to 35.3% in 3Q26 despite higher coal and electricity costs.”
