Aluminium demand to rise on expected Fed cuts

PETALING JAYA: Anticipated US Federal Reserve (Fed) rate cuts in 2025 may boost demand for aluminium, alloys and industrial products, according to BIMB Research.

In a report, the research house stated that aluminium prices are set to rise in 2025 due to supply constraints and stable demand.

“On the supply side, constraints, particularly from China, are likely due to rising energy costs, stricter regulations, and evolving trade policies,” BIMB Research said.

“Limited production growth and tariff uncertainties further complicate the restart of idle capacity, potentially pushing aluminium prices higher.”

On the demand side, the research house said China’s anticipated stimulus in March 2025 could provide a significant boost, both domestically and globally, alongside continued growth in electric vehicles and renewable energy.

However, BIMB Research expects the alloy market to remain under pressure, weighed down by persistent challenges in the steel sector, leading to subdued mid-term demand.

In industrial manufacturing, despite a weak global outlook, the research house stated that “effective strategic management will help companies navigate headwinds and sustain growth”.

“Overall, the anticipated Fed rate cuts could improve global demand, benefiting aluminium, alloys, and industrial products.”

However, BIMB Research maintained a “neutral” stance on the industrial sector, citing external risks and global headwinds that “may exert downward pressure on the industry”.

The research house has “buy” recommendations on Press Metal Aluminium Holdings Bhd with a target price (TP) of RM6.45 a share, OM Holdings Ltd (OMH) at RM1.61, and Wellcall Holdings Bhd at RM1.87.

It has “hold” calls on Scientex Bhd with a TP of RM4.50 a share and Hextar Global Bhd at 98 sen, and a “sell” call on Kumpulan Perangsang Selangor Bhd with a TP of 53 sen.

BIMB Research said metal stocks under its coverage delivered mixed results in financial year 2024 (FY24), with Press Metal falling below estimates, while OMH performed in line with expectations.

“Despite missing our in-house assumptions due to higher alumina prices in FY24, Press Metal achieved another record-breaking performance for the year,” the research house noted.

Alumina prices averaged US$675 in FY24, marking a 98.5% year-on-year (y-o-y) increase.

Looking ahead, BIMB Research expects Press Metal to maintain stable earnings, supported by higher aluminium prices and steady demand.

However, it said OMH may face challenges due to price pressure and slower demand, driven by overcapacity in the steel industry following weaker construction activity in China.

Meanwhile, in the industrial manufacturing sector, most stocks performed as expected, except for Hextar Global, which underperformed.

“Hextar Global’s revenue grew 37% y-o-y in FY24, driven by strong performance in the specialty chemicals segment and contributions from its newly introduced fruits segment.

“However, earnings were offset by weakness in the agrichemical segment and losses from the fruit segment,” it said.