PETALING JAYA: Increasing demand in key industries and new capacity additions could support growth of the industrial sector.
However, external factors including uncertainties surrounding US President Donald Trump’s trade policies and geopolitical tensions could disrupt the overall industry, creating volatility in the short-term.
“While there are growth opportunities, the broader macroeconomic and trade policy risks may weigh on sector performance,” BIMB Securities Research said.
The research house, which maintained its “neutral” call on the sector, has “buy” calls for Press Metal
Aluminium Holdings Bhd, OM Holdings Ltd and Wellcall Holdings Bhd.
It has “hold” calls for Scientex Bhd and Hextar Global Bhd while having “sell” calls for Kumpulan Perangsang Selangor Bhd, PMB Technology Bhd and Ann Joo Resources Bhd.
BIMB Research said Press Metal stood out as its selected “buy” stock.
“We have an optimistic outlook on the aluminium sector, supported by expectations of a recovery in aluminium demand, driven by a rebound in average selling prices (ASPs) and increasing global awareness of sustainable and low-carbon industries,” it explained.
The research house added that Press Metal will benefit from a hike in global aluminium prices, the removal of the 13% tax rebate on aluminium exports by China and rising demand for non-China aluminium.
It said the company is well-positioned to capitalise on the potential spillover effects of heightened US-China trade tensions, as buyers diversify supply chains.
“While risks such as a potential alumina supply shortage and rising alumina prices remain, Press Metal’s joint venture arrangements and strategic sourcing initiatives are expected to help mitigate these challenges,” the research house said.
Looking ahead, BIMB Research said Press Metal's projected earnings before interest, tax, depreciation and amortisation margins for 2024 and 2025 are expected to exceed the peer average.
Meanwhile, the research house believed lower interest rates will drive growth in metals demand and industrial manufacturing.
It pointed out that the US Federal Reserve has projected two rate cuts in 2025 due to high inflation and this was expected to positively impact metals demand and industrial manufacturing.
In addition, lower borrowing costs should encourage investment in key sectors like infrastructure, construction, and manufacturing, which are major users of metals such as steel, aluminium and copper.
“This will help reduce financing costs, boost demand for raw materials, and ease cost pressures on manufacturers, potentially improving margins. While the full effects may take time, the overall environment of lower rates is expected to support growth in the metals and industrial sectors in the medium term,” it added.
Similarly, BIMB Research said the steel sector was poised for growth, driven by key infrastructure projects such as the phase 3 of light rail transit 3 and the Sabah-Sarawak Link Road along with robust demand from the real estate sector, particularly residential and industrial parks projects.
It added that projects outlined in the Public-Private Partnership Master Plan 2030 (PIKAS 2030) and the National Budget 2025 were also expected to boost domestic steel consumption, particularly for long steel products like rebars and structural steel as well as flat steel for construction finishes.
“With resilient demand from these sectors, local steel producers stand to benefit from increased order volumes and potential price hikes,” the research house said.
However, it added that downside risks persist despite the rebound in domestic investment whereby rising raw material costs such as iron ore and scrap as well as global supply chain disruptions may pose challenges.
Additionally, competition from low-cost imports could further pressure local manufacturers, the research house said.
