The new smelter will raise the group’s production capacity by 42% to 1.08 million tonnes from 760,000 tonnes per annum.
Press Metal, South-East Asia’s largest integrated aluminium producer, operates aluminium smelting plants in Bintulu and Mukah.
“Our plan to commission the Phase 3 smelter in January 2021 is on track, increasing our capacity by 42% from 760,000 up to 1,080,000 tonnes per annum. This expansion is timely as aluminium price has strengthened by more than 40% over the last few months and we see that the world is looking at further economic recovery in 2021, ” said group chief executive officer Tan Sri Paul Koon (pic) in a statement as the company reported its latest quarterly results.
Press Metal posted group net profit of RM121.5mil in the third quarter of 2020 on expanded revenue of RM2.12bil, as compared to RM121.2mil and RM1.86bil, respectively, in the corresponding period in 2019.
Aluminium price on the London Metal Exchange (LME) has risen to about US$1,978 per tonne (three-month contract). The strong recovery saw Press Metal share price hit past RM7 on Friday from a low of RM2.70 in March 2020.
Koon said China’s swift economic rebound has led to increased aluminium demand and higher domestic prices on the Shanghai Futures Exchange (SHFE) as compared to LME price.
“China, which historically was a net exporter, has reversed its position to be a net importer of primary aluminium during this quarter. Inventory levels are also seen to be decreasing week-on-week, which only demonstrates the tightness of aluminium supply in China currently, ” he added.
Koon said the construction of Press Metal’s 25%-owned PT Bintan alumina refinery (PT BAI) is also well in progress, and its Phase 1 commissioning is expected in the first quarter of next year.
To recall, Press Metal inked an agreement to take up the 25% stake in PT BAI for US$80.23mil in November 2019. PT BAI is building a one-million-tonne alumina refinery plant in Indonesia’s Bintan island, with plan for a second phase.
The acquisition of the stake in PT BAI, according to Koon then, will provide the group with a long-term supply of alumina via the purchase of not less than 50% of alumina produced before completion of the project, and up to 1.5 million tonnes upon project completion.
With this, reliance on third-party supplier for alumina needs will reduce considerably, providing stability for the group’s smelting operations.
Together with its earlier acquisition of Australia-based Worsley Alumina Unincorporated Joint Venture, Press Metal will be able to cover about 80% of its enlarged alumina requirements when the new Phase 3 smelting is operational, according to Koon.
In 2018, Press Metal paid A$250mil for a 50% stake in Worsley, which is one of the world’s largest and lowest cost alumina producers.
On Press Metal’s current quarter financial performance, Koon said the improved performance saw profitability returning to pre-Covid-19 level.
“Following the re-opening of economies after the global lockdown, we see positive trends in aluminium demand as different industries begin their recovery from the lows in the first half of the year. We observed improved demand from key end-user industries such as the automotive and construction sectors where manufacturers for these industries were holding low inventory, ” he added.
By JACK WONG, thestar.com