Aluminium Gained As Support

Aluminium gained as support seen after a recent Chinese government document proposed that about a third of aluminum capacity should be shut over the winter months. Inventories of aluminum ingot in China’s five major trading markets were 905,000 tonnes, surging 319 percent from the record low of 216,000 tonnes seen on September 29, 2016, and 166 percent from the level seen in early 2017. 

China’s aluminum inventories dropped sharply in 2016 due mainly to following two factors. First, tumbled aluminum prices in 2015 triggered a round of inefficient capacity cuts, production reduction and suspension. According to SMM data, China’s aluminum capacity grew by 9 percent in 2016, unchanged from 2015’s, but down sharply from the growth of 18 percent in 2014. Second, a large amount of aluminum ingot was piled up in Xinjiang due to transportation disruption, another factor behind a big drop in inventories in the five trading markets.

According to data, China’s aluminum output, which gradually grew from 2H 2016, increased to 3.04 million tonnes in January 2017, refreshing a record high. Shipments from Xinjiang increased, with average daily shipments of aluminum ingot and billet above 22,000 tonnes recently, despite of pressures from new output. Traders said worries persisted about consumption levels in China after the country's housing minister on Thursday suggested moves were afoot to stabilise the property market. 

Chinese banks extended 2.03 trillion in net new yuan loans in January, the second-highest monthly tally on record and nearly double the December number. Technically market is under fresh buying as market has witnessed gain in open interest by 15.14% to settled at 1080 while prices up 2 rupees, now Aluminium is getting support at 125.2 and below same could see a test of 124.3 level, And resistance is now likely to be seen at 126.5, a move above could see prices testing 126.9.

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Suhani Verma

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