Press Metal optimistic on alumina supply growth

KUCHING: Press Metal Aluminium Holdings Bhd expects the tight supply of alumina to ease further this year in anticipation of increased global production.

Group chief executive officer Tan Sri Koon Poh Keong expects the expansion of refinery capacity in Indonesia, India and China to raise global alumina production.

“This increase in supply is driving down high alumina prices, alleviating pressure on aluminium production costs,” he said in the company’s financial year ended Dec 31, 2024 (FY24), annual report.

Koon said the rising alumina prices, driven by temporary supply disruptions and elevated freight costs exacerbated by port congestion and geopolitical tensions, had posed a significant operational challenge to aluminium producers worldwide in 2024.

The average market price of alumina, a key raw material in aluminium production, was US$501 per tonne – approximately 21% of the average aluminium price in 2024 compared to 15% in 2023.

“However, our cost structure was cushioned from the full effect of the market price due to our lower-priced alumina inventory,” he added.

Koon said although alumina prices began to ease towards the end of last year, risks remain, particularly in bauxite sourcing due to policy changes and supply disruptions.

He said Press Metal, South-East Asia’s largest integrated aluminium producer, has intensified its focus on leveraging upstream alumina assets and enhancing vertical integration capabilities.

“By securing a stable supply of raw materials and optimising our production processes, we aim to mitigate the impact of price volatilities and strengthen our operational margins.”

Last September, Press Metal announced an 80% equity participation in a new alumina refinery, PT KAN, in Indonesia.

“The refinery is expected to come on stream in two years, with an annual production capacity of one to 1.2 million tonnes per annum, with the potential to increase this capacity in the future.

“Our upstream expansion will increase our alumina leverage substantially and boost our competitive edge across the aluminium value chain.

“It is an effective approach towards ensuring high self-sufficiency and a stable supply of our alumina needs, which are critical to our core smelting operations.

“This will also reduce our reliance on third-party suppliers and traders, ensuring greater operational resiliency and efficiency.

“With the close proximity of the refineries in Indonesia to our smelters in Sarawak, we anticipate cost savings that will further optimise our overall operations,” Koon noted.

To bolster its upstream integration, Press Metal acquired a 25% stake for US$80.23mil in another Indonesian alumina producer, PT Bintan Alumina Indonesia (PT BAI), in 2019.

According to Koon, PT Bai now boasts a capacity of two million tonnes per annum, with plans to expand by another two million tonnes within two years.

PT BAI, via its holding company, Nanshan Aluminium International Holdings Ltd, recently completed its initial public offering, listing in Hong Kong to raise funds for expansion.

Reviewing the 2024 global aluminium market, Koon said it was marked by significant volatility, shaped by a complex interplay of geopolitical tensions, shifting trade policies and supply chain disruptions.

Aluminium prices began the year above US$2,100 per tonne, reaching a peak of circa US$2,700 per tonne in May before it underwent a price correction.

Prices rebounded to above US$2,500 per tonne by end-2024, buoyed by lower US interest rates and persistent supply constraints in both the aluminium and alumina markets.

He said the recent US administration’s announcement of a 25% tariff on aluminium imports has already sparked an initial market reaction, leading to higher aluminium prices and an increase in the US Midwest premium.

“While the United States is a net importer of aluminium, this tariff will likely result in increased costs for US consumers as the supply gap still necessitates reliance on external factors.

“While it is too early to determine the long-term impact on global metal flows and regional pricing, Press Metal’s direct exposure to the US market remains minimal.”