A SUSTAINED bull-run in global aluminium prices over the next 12-18 months can be anticipated as there is a global synchronised directional movement towards reaching net-zero carbon emission albeit different targeted timelines across various countries.
In fact, Hong Leong Investment Bank (HLIB) Research noticed major structural decarbonisation trends across two key industries, namely (i) electric vehicles (EV) in the automotive sector; and (ii) renewable energy sectors globally.
Boosted by the general global economic recovery post-pandemic or “endemic reopening”, the research house strongly believes that aluminium would play a pivotal role in these vital decarbonising movements.
“We project aluminium prices to close at US$2,950/tonne by end-2021F and to further increase by 7% and 10% to an average of US$3,150/tonne and US$3,250/tonne in 2022F and 2023F respectively,” justified analyst Jeremie Yap in a thematic update on the aluminium industry.
“Year-to-date 2021, aluminium prices have averaged US$2,380/tonne and were last seen at about US$2,915/tonne.”
Delving deeper into prospects, HLIB Research foresees bright spots in the global transport sector to spill-over onto the aluminium industry.
The transport industry (both automotive and aviation) accounts for circa 23% of global aluminium consumption annually. In a bid to reduce carbon emissions, the electric vehicle (EV) trend is taking the world by a storm.
This runs parallel with the quest to further scale down long-term dependency on fossil fuels by replacing vehicles that typically operate using internal combustion engines (ICE).
In this regard, the International Energy Agency (IEA) has projected EV sales to increase by 40 times (base case) to 70 times (bull-case) by 2030F from 2015.
“This would also spill over into increased demand for aluminium as aluminium content in an EV is about 70kg (39%) more than a typical ICE vehicle,” projected HLIB Research.
Moreover, aluminium is also used in most clean-air power technologies, particularly solar.
“Based on our findings, we note that aluminium accounts for circa 85% of most photovoltaic (PV) components in the form of the frames that holds the PV panels together,” reckoned the research house.
“Solar power is the fastest-growing renewable source of clean energy. The International Renewable Energy Agency (IRENA) is expecting cumulative solar PV capacity to grow six times to circa 2,800 gigawatt (GW) by 2030F.”
For exposure to the aluminium space, HLIB Research recommended Press Metal Aluminium Holdings Bhd (“buy”; target price: RM7.42) “as we remain ecstatic and upbeat about the group’s earnings prospects in the next 12-18 months”. – Oct 7, 2021
Pic credit: Reuters
