KUALA LUMPUR: Affin Hwang Capital has lowered its aluminium price per megatonne assumptions for 2023 to 2025 on concerns of a global growth deceleration and a marginal surplus in the aluminium market.
Affin Hwang said concerns of global growth deceleration coupled with the expectation of a marginal surplus in the aluminium market would weigh down on aluminium prices.
"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," it added.
The price assumptions imply that aluminium prices may crash below US$1,800 per mt in the fourth quarter of 2023 (4Q23), taking a cue from aluminium prices seeing a decline after economic downturns.
"While it may appear our average selling price (ASP) decline assumption may not be as steep as during the previous economic downturns, we note that aluminium had already fallen 40 per cent from the peak of US$3,900 per mt back in March 2022 from recessionary fears.
"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," it said.
In line with that, Affin Hwang said it had cut Press Metal Aluminium Holdings Bhd's 2023 to 2025 earnings estimates by 37 per cent, 24 per cent and 10 per cent due to lower aluminium prices, lower carbon anode prices and a weaker ringgit.
Post its earnings revisions and rollover of valuation, Affin Hwang also lowered its 12-month target price for Press Metal to RM4.00.
It downgraded its rating to a "Sell" call given the heightened risks of recessions in major economies.
It also believes that consensus earnings estimates for Press Metal are far too aggressive and will likely see a downward revision in the upcoming results release.
Key upside risks to its call include higher-than-expected aluminium demand from China, sustainable increase in aluminium prices and lower-than-expected raw material costs.
