RHB research stated that, given the projected long-term demand for aluminium, Press Metal Aluminium Holdings Bhd's prospects are still strong. Press Metal will continue to gain from the Bakun Dam power purchase agreement with Sarawak Energy Bhd, which provides a long-term supply of energy at competitive rates.
The research house team, which recently paid a visit to Press Metal's smelting facility in Bintulu, Sarawak, said that it had positive impressions of the company. The research team noted that Press Metal has a combined annual capacity of 1.08 million tonnes, thanks to a downstream extrusion operation that is connected with its Greenfield aluminium smelting operations in Mukah and Samalaju.
The business also runs aluminium extrusion facilities in China and Malaysia. Press Metal's Phase 3 smelting operations, with a capacity of 320,000 tonnes annually, began in October last year, RHB Research noted in a letter to clients.
Press Metal is still a favourite of RHB Research, which maintains a "buy" call on the company due to its strong market position in the emerging decarbonisation period. However, the two main dangers on the downside are a rapid decline in the state of the global economy and a rise in the price of raw materials.
“Utilisation rates for Phases 1 and 2 smelters at Press Metal inched higher to 94 per cent against 92 per cent in May while Phase 3 is operating at 97 per cent of capacity as its maintenance programme normalises further. We take comfort from Press Metal’s fume treatment system (FTS) whereby pot fume ducts are connected to the main fume duct, which directs the fumes to the FTS,” said the RHB researchers.
“Looking ahead, we expect alumina prices to average US$375 (RM1,672) per tonne in FY22, supported by output cuts at alumina refineries in China in light of a bauxite shortage, a raw material used to produce alumina,” added RHB researchers.
RHB Research pointed out that with a continuous emission monitoring system connected to the Environment Department, emission limits are also in place for gases like sulphur dioxide (capped at 100mg per cubic metre). As a result, according to RHB Research, aluminium prices might average US$2,850 (RM12,707) per tonne for the fiscal year 2022 (FY22). However, in the short to medium term, prices may decline because of persistent worries about a global recession and anxieties about China's lockdowns.
“As such, aluminium prices could reach an average of US$2,850 per tonne for FY22. Notwithstanding this, demand for aluminium should remain intact in the long run amid a gradual shift towards renewable energy adoption via solar panels and electric vehicles,” added researchers.
Because of geopolitical threats, the price of alumina, which makes up Press Metal's cost, reached a peak in March of US$505 (RM2,252) per tonne. On the other hand, current alumina prices are 33% lower than their peak, at US$340 (RM1,516) a tonne.
“Looking ahead, we expect alumina prices to average US$375 (RM1,672) per tonne in FY22, supported by output cuts at alumina refineries in China in light of a bauxite shortage, a raw material used to produce alumina. Meanwhile, prices for carbon anode have averaged 6,300 yuan per tonne so far in 2022, in line with higher crude oil prices, said RHB researchers.
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