Hulamin spikes on talk of US steps against Moscow

Aluminium fabrication business Hulamin’s share price spiked to a four-month high on strong trading volume on Thursday, triggered probably by reports of a possible US ban on Russian aluminium imports.

Reports suggest the US is considering a total ban on Russian aluminium imports, imposing sanctions on one of its large producers, or slapping punitive import tariffs on Russian stock. The measures would be in retaliation for Moscow’s invasion of Ukraine.

Hulamin, which already exports large quantities of aluminium to the US, is  seen as likely to benefit from any supply shortages caused by efforts to curb Russian supply seriously.

Brendan Hubbard, a portfolio manager at Clucas Gray, said that aluminium fabricators paid a regional premium for stock above the quoted LME (London Metals Exchange) price.

With a shortage of supply likely in the US if Russian imports are curtailed or stopped, Hubbard says US aluminium fabricators will  be paying a higher regional premium if there was a shortage of stock. He said this would help Hulamin, which benefits from a lower regional premium for its supply sourced from mining group South32, to expand their margin.

While Hulamin was one of the top JSE gainers —  hitting an intraday high of 319c — the share price is still well off the 12-month high of 545c in early May, and still heavily discounts the group’s latest stated net asset value (NAV) of more than 900c a share. ​

The share price, however, has been recovering  slowly   since August on the weaker R/$ exchange rate, which bolsters Hulamin’s large export orders.

Hulamin’s interim report released in late August showed turnover up 45% to R7.9bn and earnings before interest and tax (Ebit) surging 144% to R223m.

But second half performance could be hampered by logistical issues,  including continuing operational problems at SA ports. The wary market view on Hulamin’s prospects is reflected in the trailing earnings multiple of just 1.3 times.

By close of trade on the JSE on Thursday, Hulamin's share price had gained the most in five weeks, up 6.79% to R2.99.