---
endpoint: analytics
pattern: Materials
status: done
latency_ms: 182088
conversation_id: 51c58362-3ea8-44e9-8e0f-4bbdb6460421
citations: 14
created: 2026-05-31 22:24:33Z
---

# What are the key risks to Press Metal’s growth trajectory?

# Key Risks to Press Metal's Growth Trajectory

Press Metal Aluminium Holdings (PMAH MK / 8869.KL) is one of the largest aluminium smelters in Southeast Asia, with growth tied to its Sarawak smelting capacity, its alumina refinery expansion via PT Bintan (Nanshan Aluminium), and the trajectory of global aluminium prices. Internal research from CLSA and the company's own Integrated Annual Report 2025 cluster the key downside risks into five buckets: **(1) commodity-price and input-cost cyclicality**, **(2) supply-side risk from China**, **(3) regulatory/energy-cost risk in Sarawak**, **(4) geopolitical, tariff, and trade-policy risk**, and **(5) execution risk on capacity expansion and ESG transition**.

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## 1. Commodity Price Cyclicality (Aluminium + Alumina)

Press Metal is a price-taker on the LME — its profitability is "closely linked to aluminium prices, which are influenced by global macroeconomic conditions, geopolitical developments, energy and raw material prices, inflationary pressures and the pace of investments in green infrastructure and energy transition initiatives" [9]. Aluminium prices in 2026 are expected to remain supported but "subject to continued volatility" [10].

- **Alumina input cost is the single largest swing factor**: alumina prices spiked from US$504/mt in 3Q24 to ~US$800/mt by year-end 2024, directly compressing smelting margins [4]. CLSA flagged that "prolonged tight raw material prices could keep cost of sales high" [1][2].
- **Smelting economics are highly leveraged**: "Smelting and casting activities are capital- and energy-intensive, and margin pressure arising from weaker prices, premiums or volumes could challenge the economics of large-scale smelting assets" [12].
- **Hedging only partially mitigates this** — CLSA's model assumes ~50% hedge in FY25CL falling to 35% in FY27CL, leaving the majority of volume exposed to spot LME swings.

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## 2. Supply-Side Risk: China Capacity & Export Policy

CLSA flags this as the top investment risk across every Press Metal note since 2024: **"Key risks lie in a quicker-than-expected recovery in China's capacity"** [1][2]. China is running close to its 45m mt structural cap, but:

- Any policy loosening of that cap would flood the market and pressure LME prices.
- Conversely, recent policy moves (e.g., removal of the aluminium export tax rebate) have been supportive [7], but the favourable backdrop is itself policy-dependent and reversible.
- US tariffs threaten to dampen demand: CLSA notes Aly prices are "well supported at current levels (US$2.5k/mt) on China's production cap (supply tightness), offsetting anticipated modest demand due to US tariffs" [3].

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## 3. Regulatory & Energy-Cost Risk in Sarawak

This is the most company-specific risk in the CLSA reports:

- **Sarawak state aluminium tax**: CLSA explicitly cites "regulatory risk (imminent aluminium tax pending finalisation by the Sarawak state)" as a key downside risk [1][2]. A new state-level tax would directly hit per-tonne profitability for the Bintulu and Mukah smelters.
- **Power tariff renegotiation in 2027/2028**: Press Metal's plants in Sarawak consume ~30% (1,700 MW) of total available electricity from Sarawak Energy Berhad under a power purchase agreement that "remains in place until 2028." The "electricity tariff could be revised upwards" when the new tender is finalised in 2026 [5]. Cheap, stable hydropower-sourced electricity has been Press Metal's core cost advantage — any meaningful upward revision is structurally negative.
- **Pioneer tax incentive expiry**: PMBtu's tax-exempt pioneer status under MIDA runs only until 31 December 2027 [5], creating a normalised tax-rate cliff thereafter.
- The company itself acknowledges: "Energy expenditure represents a significant portion of operating costs; ineffective energy management, supply disruptions or prolonged price volatility could impact operating costs" [13].

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## 4. Geopolitical, Tariff & Logistics Risk

- **Global supply chains face "persistent exposure to geopolitical and structural risks in 2026," with sanctions, shifting trade policies, and resource nationalism affecting raw material, energy, and industrial input flows along the aluminium value chain** [8].
- **US tariffs** are explicitly flagged as a demand headwind [3].
- **Maritime/shipping disruptions**: "Disruptions affecting critical maritime routes also present a potential risk factor… periodic operational constraints affecting key waterways may still influence shipping reliability. Extended transit times, route diversions, and elevated freight costs may therefore persist" [8].
- **Russia-Ukraine spillover** has historically driven raw-material price volatility for Press Metal [1][2].
- **FX exposure**: Earnings are USD-linked (LME prices in USD) while a portion of costs is in MYR; CLSA's 9M24 results showed RM95m in net FX losses [7], and Press Metal's mitigation relies on "commodity and forex hedging strategies."

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## 5. Execution Risk on Capacity Expansion & ESG Transition

The growth thesis hinges on two execution-sensitive vectors:

- **Alumina refinery expansion at PT Bintan / Nanshan Aluminium**: the doubling from 2m tonnes to 4m tonnes by 3Q26 is the key driver of FY26/FY27 associate-profit upside [3]. Any slippage in the 3Q25 (3m t) or mid-2026 (4m t) milestones materially compresses forecast EPS growth. Press Metal itself notes investment-related risks may arise where "execution challenges affect anticipated returns" [14].
- **P3 smelting plant restoration**: 1Q25 smelting output was lower YoY because the P3 plant was only fully restored in March 2025 [6] — a reminder that operational hiccups (the September 2024 fire being the trigger) directly hit volumes.
- **ESG / climate transition risks**: Malaysia's National Sustainability Reporting Framework (NSRF) and the Energy Efficiency and Conservation Act (EECA) 2024 "may increase administrative complexity and compliance costs," and the global decarbonisation push creates risk around recycled-aluminium demand shifts and divergent low-carbon product criteria [11].

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## Risk Summary Table

| Risk Bucket | Specific Driver | Likely Timing |
|---|---|---|
| **Commodity prices** | LME aluminium decline; alumina cost spike | Ongoing |
| **China supply** | Faster-than-expected capacity recovery | Ongoing |
| **Sarawak regulation** | New state aluminium tax | Pending finalisation [1] |
| **Sarawak power cost** | Tariff renegotiation in new PPA | 2026 tender / 2028 effective [5] |
| **Pioneer tax expiry** | PMBtu MIDA exemption ends | 31 Dec 2027 [5] |
| **Geopolitics/trade** | US tariffs, sanctions, shipping disruption | Ongoing [3][8] |
| **FX** | MYR/USD volatility, hedging cost | Ongoing [7] |
| **Execution** | PT Bintan 4m t ramp, P3 stability | 3Q25 / mid-2026 [3][6] |
| **ESG/regulatory** | NSRF + EECA 2024 compliance costs | 2025-onwards [11] |

The single most idiosyncratic and underappreciated risk is the **Sarawak power-tariff renegotiation + potential state aluminium tax combination** — together these touch Press Metal's two foundational cost-advantage pillars (cheap renewable power and tax-incentivised smelting). Commodity-price and China-supply risks are cyclical and partially hedgeable; the Sarawak regulatory cluster is structural.

---
**Sources**
[1] Press Metal - O-PF (Moving ahead on expansion) — CLSA (22 May 2025) — 607960312LinqAlpha.PDF
[2] Press Metal - O-PF (Outlook remains bright) — CLSA (1 Dec 2024) — 607945803LinqAlpha.PDF
[3] Press Metal - O-PF (Moving ahead on expansion) — CLSA (22 May 2025) — 607960312LinqAlpha.PDF
[4] Press Metal - O-PF (Outlook remains bright) — CLSA (1 Dec 2024) — 607945803LinqAlpha.PDF
[5] Press Metal - O-PF (Temporary operational hiccup) — CLSA (11 Sep 2024) — 607939402LinqAlpha.PDF
[6] Press Metal - O-PF (Moving ahead on expansion) — CLSA (22 May 2025) — 607960312LinqAlpha.PDF
[7] Press Metal - O-PF (Outlook remains bright) — CLSA (1 Dec 2024) — 607945803LinqAlpha.PDF
[8] Press Metal Integrated Annual Report 2025 — Outlook for 2026 (Supply Chain Resilience)
[9] Press Metal Integrated Annual Report 2025 — The Market We Operate In
[10] Press Metal Integrated Annual Report 2025 — Outlook for 2026 (Aluminium Prices)
[11] Press Metal Integrated Annual Report 2025 — Managing Risks (Climate / Regulatory)
[12] Press Metal Integrated Annual Report 2025 — Economic & Financial Resilience
[13] Press Metal Integrated Annual Report 2025 — Energy Management
[14] Press Metal Integrated Annual Report 2025 — Investment Performance and Financial Returns Risks

## Citations

- [1] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [2] **607945803LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607945803LinqAlpha.PDF>
- [3] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [4] **607945803LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607945803LinqAlpha.PDF>
- [5] **607939402LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/09/607939402LinqAlpha.PDF>
- [6] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [7] **607945803LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607945803LinqAlpha.PDF>
- [8] **Press Metal_IAR2025 (Part 1)** · external
- [9] **Press Metal_IAR2025 (Part 1)** · external
- [10] **Press Metal_IAR2025 (Part 1)** · external
- [11] **Press Metal_IAR2025 (Part 1)** · external
- [12] **Press Metal_IAR2025 (Part 2)** · external
- [13] **Press Metal_IAR2025 (Part 2)** · external
- [14] **Press Metal_IAR2025 (Part 1)** · external

