Messages from Our Leaders Messages from Our Leaders Press Metal Aluminium Holdings Berhad 16 17 Integrated Annual Report 2023 MANAGEMENT DISCUSSION AND ANALYSIS BY GROUP CEO POSITIONED FOR LONG-TERM GROWTH Tan Sri Dato’ Koon Poh Keong Group CEO “We are positioned strongly to capitalise on the industry’s changing dynamics and deliver long-term value and success for our business and our stakeholders.” Management Discussion and Analysis by Group CEO FOREWORD In 2023, the global macroeconomic landscape continued to be marked by challenges and uncertainties, ranging from ongoing trade tensions and geopolitical conflicts to persistently high inflation. Amidst this challenging environment, we have remained laser-focused on building our resilience and driving transformation for future success. We are growing our value-added products segment, which offers higher margins, while pursuing downstream growth opportunities in fast-growing green sectors like renewable energy and electric vehicles. We are also making commendable progress in securing our supply chain with the expansion of PT Bintan’s alumina refinery plant in Indonesia. As a result, we are confident that we will emerge from these economically uncertain times to a stronger, forwardlooking position. Armed with a truly sustainable business model, we are positioned to drive optimum long-term value for our business and our stakeholders. OVERVIEW OF PRESS METAL Established in 1986, Press Metal has grown from a privatelyowned aluminium extruder to become the largest integrated aluminium producer in Southeast Asia. Our midstream smelting plants, with a total capacity of 1.08 million tonnes per annum, are strategically located in Mukah and the Samalaju Industrial Park, Sarawak. Sarawak’s abundant rainfall and rivers ensure a consistent and sustainable hydropower supply, which is essential for our operations. Catering to a diverse clientele, including some of the world’s leading companies in transportation, construction, and consumer sectors, we offer a comprehensive range of products. This includes LME-certified high-grade aluminium ingot P1020, as well as value-added products such as billets, alloyed ingots (A356.2), and wire rods. Our downstream extrusion plants in West Malaysia and in Foshan, China, have a combined annual capacity of 230,000 tonnes per annum, enabling us to manufacture a variety of products tailored to specific usage across various industries. These include construction, automotive, consumer-related products, as well as electronics and electrical applications. To ensure a stable supply of key raw materials, we have strategically acquired and entered into collaborative agreements with companies in the upstream segment. These include equity interests in JAA and PT Bintan, respectively, enable us to secure a significant portion of our alumina requirement and reducing our reliance on third-party suppliers. 1.08 million MT SMELTING SEGMENT per annum 230k MT EXTRUSION SEGMENT per annum Additionally, our joint venture with Sunstone Development Co., Ltd has resulted in the development of a state-of-theart carbon anode plant, providing approximately 40% of our consumption requirements. MARKET UPDATES In spite of various external challenges faced in recent years, we have demonstrated financial and operational resilience by effectively managing a multitude of headwinds. The primary challenge to our business – and the aluminium industry as a whole – is the slower than expected recovery of the global economy. With inflation levels remaining high around the world and governments imposing monetary tightening policies in response, demand for aluminium in key sectors such as real estate, construction and manufacturing has moderated. Furthermore, trade and geopolitical conflicts have led to higher tariffs, trade restrictions and export quotas, with voluntary sanctions on Russian metal by some buyers have caused additional complexity to a challenging market landscape. Reflecting these challenges, 2023 was a year of consolidation and de-stocking for the industry. LME aluminium prices declined by an average of approximately 17% over the year while stocks have gradually depleted since August 2023, with headline inventory reducing to 443,000 tonnes in December 2023 – the lowest level since February 2023. The dwindling stocks signalled a tight supply of aluminium to the market despite weakened consumption due to the uncertain global economic outlook. Nevertheless, towards the end of December 2023, the official LME aluminium price surged, closing at USD2,335 per tonne, in response to the anticipated economic recovery and the expectation that the US Federal Reserve would commence interest rate cuts. Further room for optimism comes from the robust business investment climate in post-COVID China, where government policies are driving the nation’s transformation towards sustainable industries, including the solar and EV sectors. This development presents a promising growth opportunity for us as aluminium is used to form the frame of solar panels and as an input in various EV components like battery casings and car components, enabling lightweight design, improved corrosion resistance and greater durability. USD2,335 per tonne In December 2023, aluminium prices surged to
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