PMETAL: Aluminium Sector Poised for Robust Growth Amid Multi-Year High Prices, Forecasts Lifted
| Investment Bank | RHB Investment Bank |
|---|---|
| TP (Target Price) | RM8.50 (+14.7%) |
| Last Traded | RM7.41 |
| Recommendation |
RHB Investment Bank has reaffirmed its “BUY” rating, raising the target price (TP) to RM8.50, up from RM7.30, indicating a potential upside of 14.7%. The positive outlook is primarily driven by expectations of robust earnings growth in FY26F, underpinned by strong aluminium LME prices and a favourable cost environment.
Market Dynamics and Drivers
The aluminium market is experiencing significant momentum, with LME prices having surged 17.5% in 2025 to USD2,968 per tonne, currently trading within the USD3,000-3,100 range. This upward trajectory is attributed to several key factors, including a structurally weaker US Dollar, anticipated rate cuts, and an overall liquidity surge in the US market, which historically correlates inversely with aluminium prices. Furthermore, copper prices hitting all-time highs provide a strong correlative uplift, as both metals benefit from electrification and energy transition themes.
Aiding the favourable environment is a positive alumina outlook. Alumina prices have declined significantly by 54% year-on-year to USD310 per tonne, now constituting a modest 10-11% of total aluminium prices. This trend is expected to continue with new capacity coming online in Bintan and easing bauxite prices. Consequently, the investment bank has revised its LME aluminium assumptions upwards to USD2,950/tonne for FY26F and USD2,850/tonne for FY27F. These revisions have led to a substantial increase in earnings forecasts for FY25-27F, lifted by 4.5%, 17%, and 18% respectively.
Future Outlook and Demand
Looking ahead, aluminium demand is set for sustained growth, propelled by long-term structural shifts. The burgeoning electric vehicle (EV) sector is a major driver, with EVs consuming 60-80kg more aluminium per vehicle than traditional internal combustion engine cars. Global EV sales are projected to increase by 3.3 million units (+16% YoY) in 2026. The renewable energy (RE) sector also presents significant demand, with an estimated 40 tonnes of aluminium required for 1-MW solar farms. Moreover, demand for low-carbon aluminium, particularly advantageous due to hydropower-based production, is expected to surge from 19 million tonnes in 2024 to approximately 28 million tonnes by 2033.
Key Risks
However, potential risks include faster-than-expected supply growth, particularly if major producing regions like Indonesia and China ramp up production beyond current projections. A significant plunge in global aluminium or copper prices, or lower-than-anticipated demand from the renewable energy sector, could also impact the positive outlook.
