KUCHING: Press Metal
Aluminium Holdings Bhd’s extrusion plant in China has commenced the supply of aluminium battery casings and car bumpers to vehicle manufacturers in the mainland, says group chief executive officer Tan Sri Koon Poh Keong.
Meanwhile, its Nilai extrusion plant in Negri Sembilan had completed the construction of a 30,000-tonne photovoltaic components extrusion line, which is dedicated exclusively to manufacturing solar panel frames and mounting extrusions to support the solar power sector.
The new photovoltaic components production line is currently undergoing testing with potential customers, he said in the company’s 2023 annual report.
“To drive further growth in the sales of our extrusion products, we are actively on the lookout for opportunities in the renewable energy and electric vehicle (EV) markets while seeking to establish opportunities with manufacturers relocating their operations to the Asean region.
“The strategic moves into energy transition-related sectors mirror our group-wide focus on sustainability, which has accelerated over the past years.”
In the downstream segment, Koon said the group’s focus is on developing product-based extrusion solutions that address specific industry needs.
He said the group has continued to invest in the growth of its value-added products (VAPs) segment by introducing new casing lines for A356 ingots and wire rods. As a result, the segment had increased its share of the group’s total sales to 41% in 2023 from 36% in 2022.
The increasing demand for aluminium from green industries offers a more positive outlook for the industry, with the EV, solar and energy transmission sectors showing considerable growth potential.
The positive trend is further accelerated by the ongoing shift of manufacturing operations to the Asean region, which should drive demand for local and regional sources of aluminium and other inputs.
Press Metal group’s downstream extrusion plants in Malaysia and Foshan, China, have a combined annual capacity of 230,000 tonnes per annum, enabling the group to manufacture a variety of products tailored to specific usage across various industries.
They include construction, automotive, consumer-related products as well as electronics and electrical applications.
The group’s midstream smelting plants in Samalaju Industrial Park, Bintulu and Mukah, central Sarawak, have a total capacity of 1.08 million tonnes per annum, making Press Metal the largest integrated aluminium producer in South-East Asia.
The smelting plants are powered by renewable hydro power.
Koon said in the smelting segment, the group has continued to invest in growing its capacity for VAPs, which deliver higher margins compared to the primary aluminium products and enabling the group to diversify its business and minimise overall risk.
“All our smelters have obtained the ASI Performance Standard certification, showcasing our commitment to sustainable aluminium manufacturing practices and opening the door for us to supply to companies with more stringent standards around sustainable aluminium production.”
The ASI Performance Standard certification defines environmental, social and governance principles and criteria, which address a broad range of sustainability issues in the aluminium value chain.
Koon said the benefits of Press Metal’s shift towards low-carbon products were evidenced when the group secured a long-term export deal for aluminium ingots with Daching Enterprises Ltd, the world’s top three global aluminium foil manufacturers, in April 2023.
“The deal, which totalled RM110mil in revenue during financial year 2023 and will generate a further RM670mil in revenue over the following five years, was enabled in part by the low-carbon content of our ingots, which helped Daching meet its climate commitments.”
Believing that climate change remains a fundamental driver of change for manufacturers, Koon said regulatory pressure has already come in the form of the European Union’s Carbon Border Adjustment Mechanism, which will effectively impose carbon cost on imports of aluminium and other goods when its transitional phases conclude at end-2025.
Meanwhile, China’s Emission Trading System is expected to be expanded to include industrial production, including that of aluminium, in the future.
Koon said this development may benefit aluminium producers outside of China over the short-term by reducing market supply from China, as national players adapt to the changes and will ultimately accelerate the industry’s move towards renewable energy and other sustainable production processes.
Dynamic nature
“Taken as a whole, these trends illustrate the dynamic nature of the industry, validating our proactive moves to fortify our business and wholeheartedly embrace sustainability across our operations and through the sectors and companies we serve.
“Meanwhile, we seek to expand our market reach, ensuring the resilience of our supply chain becomes more crucial than ever.”
To this end, Koon said the group has made progress by completing phase two of its associate company, PT Bintan’s plant in Indonesia in 2023.
“This provides us a consistent supply of alumina and meeting our smelting operations’ needs. It also unlocks cost savings due to the closer geographical proximity to our smelters as opposed to relying on sources in other regions, which entails higher logistics costs,” he added.
In addition to PT Bintan, Press Metal group also owns a 50% equity interest in Japan Alumina Associate (Australia) Pty Ltd (JAA), thus enabling it to secure a significant portion of its alumina requirements and reducing its reliance on third-party suppliers.
JAA holds a 10% stake in the Worsley Alumina unincorporated joint venture, which operates the Worsley alumina project, one of the world’s largest and lowest-cost alumina producers.
Commenting on the trends and market outlook, Koon said in the short term, Press Metal foresees a consolidation of the aluminium market at present levels,indicating that the worst might be over.
He said 2023 was a year of consolidation and destocking for the aluminium industry as London Metal Exchange aluminium prices fell by an average of about 17% over 2022.
Meanwhile, stocks had gradually depleted since August, with headline inventory reducing to 443,000 tonnes in December 2023, the lowest level since February 2023.
“We also anticipate that the demand for aluminium will result in interest rates potentially embarking on a reversal course and global economies continuing to recover.
“While the demand for aluminium awaits a rebound in the economy, its supply, previously curtailed, is expected to make an equally slow return to normal levels due to the scarcity of renewable energy for low-carbon production.”
Gradual price improvement
Consequently, Koon said there is a possibility of a gradual improvement in aluminium prices, aligning with the potential recovery of the global economy.
“Looking further ahead, we are confident in the prospects of the aluminium industry.”
With increased capital investments in green sectors and a shift towards low-carbon content aluminium, Koon said sustainable industry players stand to benefit from an increase in demand, cushioning the reduced demand from traditional industries.
“Additionally, the supply chain outside of China may experience a higher demand for aluminium as manufacturing operations relocate to Asean, thus providing new opportunities for local players to capitalise on,” he said.
