Aluminium producer Hulamin has drawn attention to upbeat prospects for the company’s 2017 financial year.
Speaking at its annual meeting last week, Hulamin chairman Mafika Mkwanazi said a stronger product mix, increased utilisation of scrap metal and efficiency improvements — supported by a solid manufacturing performance — were expected to benefit profits for the first half of 2017.
He said the benefit of a stronger global aluminium price was expected to offset the negative effect on Hulamin’s conversion margins based on the significantly stronger rand-dollar exchange rate average recorded in the first few months of the new financial year.
Mkwanazi said Hulamin was seeing encouraging momentum across all its operations, particularly its rolled products division, with a full order book for the balance of the current year and buoyant customer demand.
He said local packaging and engineering markets had improved since late 2016 and were "somewhat stronger" than the first quarter of 2016.
"Local sales of can stock, which are usually seasonally lower in the first quarter, increased measurably in March of the current year after an expected slow start. Our expectation remains for reasonably strong growth in local sales in 2017, underpinned by increasing can stock demand."
Mkwanazi highlighted that the US had filed antidumping and countervailing duty petitions in March against the import of aluminium foil products from China.
"On April 21 2017, the US International Trade Commission made an affirmative preliminary injury determination regarding imports of aluminium foil from China. This action should serve to strengthen realised foil prices in the US."
Mkwanazi said that the London Metals Exchange price of aluminium had increased notably since early 2016 and remained firmer into 2017 following concerns about global supply.
He said analysts were now predicting that aluminium’s 10-year down-cycle may be over. "This prediction is based on declining supply out of Asia on the basis of capacity closures being driven by poor returns and new pollution controls in China that are affecting its aluminium smelting industry."
Mkwanazi said that as global supply was dominated by
Chinese capacity, these changes were expected to have a material effect on global supply.
He reminded shareholders that Hulamin benefited from a rising aluminium price via the unhedged portion of its aluminium inventory pool.