OfBusiness Aluminium Daily Market Report | 6th April 2024

Price

• As of Friday LME opened at $2447/ton and closed at $2449/ton. Today, the markets are closed due to the weekly holiday.
• As of Wednesday SHFE opened at Yuan 19800/ton and closed at Yuan 19855/ton. SHFE will close on holidays from April 4, 2024 (Thursday) to April 6, 2024 (Saturday), and will open as usual on April 8, 2024 (Monday).
• As of Friday MCX Aluminium prices opened at Rs.221.8/kg and closed at Rs.223.5/kg. Today, the markets are closed due to the weekly holiday.

Demand and Supply

• The London Metal Exchange (LME) witnessed significant price surges across base metals, driven by optimistic macroeconomic reports from China, with all metals marking gains.
• Aluminium futures for three-month delivery showed a modest uptick of 2% to reach $2,429 per ton (t), while nickel exhibited a 1.8% rise to $17,339 per ton. Copper prices settled at $9,262 per ton, and zinc experienced a notable increase of 2.7% to $2,548 per ton. Lead prices also climbed by 3% to $2,082 per ton. Meanwhile, stocks at LME-registered warehouses displayed a mix of trends during this period.
• Spot prices for ADC12 alloy ingots surged by INR 2,000 per ton (t) in Delhi, reaching INR 213,000 per ton. Tensions in offers were noted in both Delhi and Chennai markets, with trade levels observed to be lower in Chennai. Aluminium casting scrap is currently being exported to Korea, and the production of ADC12 alloy operates at 60-70% capacity due to price differentials. Meanwhile, silicon prices have witnessed notable declines.
• Robust economic indicators and apprehensions surrounding ongoing inflation are causing investors to reassess the scope for potential interest rate reductions by the Federal Reserve, resulting in a decline in the U.S. government bond market. The yield on the 10-year treasury has reached 4.429%, marking its highest point in more than four months.
• The expansion of the U.S. services industry moderated in March, with the Institute for Supply Management’s PMI dropping to 51.4, indicating a moderate pace of growth. Despite new orders declining, production remained robust, and prices paid for inputs reached a four-year low, indicating a favourable inflation outlook. However, there was a slight improvement in employment levels, underscoring persistent challenges in the labour market.

News

• Press Metal Aluminium Holdings Berhad, a Malaysian-based integrated producer of aluminium, is expected to report higher net profit for the first quarter (Q1) of 2024, supported by increased spot prices of the metal despite volatile production costs.
• Maybank Investment Bank Bhd (MaybankIB) estimates Press Metal’s core earnings for Q1 2024 to range between RM315 million and RM365 million. This represents an increase from the previous quarter (Q4 FY2023), where the company’s core earnings totalled RM328.4 million.
• The bank attributes this projected increase in earnings to the upward trend of the aluminium spot price on the London Metal Exchange, averaging US$2,243 per ton in Q1 2024.
• MaybankIB’s estimate implies that Press Metal’s earnings for Q1 2024 would account for 22-25 per cent of their revised full-year forecast for FY2024 and 21-24 per cent of consensus full-year estimates of RM1,510 million.
• However, MaybankIB has revised down Press Metal’s net profit forecasts for FY2024 to FY2026 by 8 per cent/7 per cent/7 per cent, respectively, due to higher operational expenses and logistics costs. The bank also maintains a subdued expectation for the spot aluminium price in the mid-term.
• In Q4 FY2023, Press Metal recorded a revenue of RM3.53 billion, down from RM3.91 billion a year ago, primarily due to lower metal prices. Despite this, profit after tax and minority interests increased by 22.9 million for the same period. For the full year, the company’s revenue was RM13.8 billion, representing an 8 per cent decrease from RM15 billion in FY2022.

OFB’s Opinion

• It is expected that aluminium prices will continue to surge on the MCX due to various factors including heightened premiums in Japan, positive economic indicators from China and the United States, and geopolitical tensions between Russia and Ukraine.
• Despite uncertainties stemming from the drought situation in Yunnan and power outages in regions like Inner Mongolia, efforts to stimulate demand and the traditional peak season are driving higher operating rates across processing sectors.
• Moreover, with Japanese buyers paying significant premiums, tightness in the aluminium market and strong demand dynamics are evident, supporting fresh buying activity.