Affin Hwang Capital, the Malaysian-based investment banking group, had reduced its aluminium price per megatonne projections for 2023 to 2025, citing worries about global growth deceleration and a slight oversupply in the aluminium market. The pricing assumptions suggested that aluminium prices may fall below US$1,800 per tonne in the fourth quarter of 2023 (4Q23), following in the footsteps of aluminium prices that have fallen during economic downturns.
"We now expect 2023 to 2025 aluminium prices to average at US$2,220, US$2,300, and US$2,400 per megatonne (mt) respectively from US$2,550 per mt previously. We also lower our carbon anode price assumptions as prices have eased since the peak back in June 2022 from lower oil prices," said Affin Hwang Capital.
"We expect carbon anode prices to average 5,800 yuan per mt for the year. We expect share price volatility ahead, given the expectations of aluminium prices bottoming in 4Q23," added the company.
Affin Hwang stated that it had reduced Press Metal Aluminium Holdings Bhd's profit projections for 2023 to 2025 by 37 per cent, 24 per cent, and 10 per cent, respectively, owing to lower aluminium prices, lower carbon anode costs, and a weaker ringgit. Following its results revisions and value rollover, Affin Hwang reduced its 12-month target price for Press Metal to RM4.00.
Given the increased likelihood of recessions in major economies, it reduced its rating to a "Sell" recommendation. It also feels that Press Metal's consensus profit projections are too optimistic and will be revised lower in the release of the following result. The key upside risks to its prediction include higher-than-expected Chinese aluminium demand, a sustained rise in aluminium pricing, and lower-than-expected raw material costs.
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