HLIB Research keeps ‘hold’ call on Press Metal
KUALA LUMPUR: The increase in alumina prices by 8.0 per cent to 3,241 yuan per tonne in the first quarter due to supply disruptions in Guinea and Australia may have adverse implications for Press Metal Aluminium Holdings Bhd’s smelting margins.
Nonetheless, this impact could be offset by improved contribution from its associate, PT Bintan Alumina Indonesia, attributable to the higher alumina average selling price, said Hong Leong Investment Bank Bhd (HLIB Research) in a report yesterday.
“Additionally, carbon anode prices continued to decline in the first quarter, down 7.0 per cent quarter-on-quarter, attributed to an oversupply in petroleum coke.
“Despite the lagging Major Japan Port (MJP) premium behind the rising freight costs in first quarter, it is expected to catch up starting from the second quarter as MJP spot premium surged by 60 per cent quarter-onquarter to US$145 per tonne,” it said.
HLIB Research noted that since the Red Sea attacks, freight costs had risen by US$80 per tonne.
“However, in the first quarter, the MJP spot premium remained behind. But it is expected to align with the increase in freight costs starting from the second quarter.
“According to S&P Global, the
MJP premium for the first shipment of the second quarter surged 60 per cent quarter-onquarter to US$145 per tonne, surpassing the premium for last year,” it said.
The research firm said despite indications of an improvement, it was wise to remain cautious.
“China’s official manufacturing Purchasing Managers’ Index rebounded in March to a one-year high of 50.8, ending five months of contraction.
“This development drove LME (London Metal Exchange) aluminium prices above US$2,400 per tonne.”
HLIB Research said Bloomberg Intelligence predicted that the
surplus in the aluminium market would decrease this year due to China’s rebound in demand and a reduction in output, along with the possibility of increased orders from other regions as inflation subsided.
The research firm expects Press Metal’s first quarter core earnings
to fall within the range of RM330 million to RM350 million, showing a 7.0 per cent quarter-onquarter increase and a 13 to 20 per cent year-on-year rise.
“We maintain our ‘hold’ call on Press Metal with a higher target price of RM4.65 from RM4.38 previously,” it added.