Introduction
In the ever-fluctuating world of commodities, aluminium has recently seen a notable turnaround, with prices gaining 0.94% to settle at 199.3. This shift, driven by short covering following a previous drop due to rising LME inventories, marks a critical point for investors and industry stakeholders alike.
Recent Market Movements
After reaching a six-week high in LME inventories at 564,675 tons, aluminium prices experienced a significant drop, only to rebound as traders initiated short covering, spurred by the anticipation of increased demand. This recent gain highlights the volatile nature of the aluminium market and underscores the importance of staying informed about inventory levels and market dynamics.
Global Aluminium Output and Demand Signals
According to the International Aluminium Institute (IAI), global primary aluminium output rose by 2.4% year-on-year to 6.039 million tonnes in January. With China emerging from the Lunar New Year holiday, the market is keenly observing demand cues, especially with the expected pickup in construction activity signaling a potential increase in aluminium demand.
Policy Changes and Their Impact
The market was taken by surprise when the People’s Bank of China announced a 25 basis point cut to its 5-year loan prime rate, marking the first rate cut since June 2023 and the largest since its introduction in 2019. This strategic move, aimed at stimulating credit demand and countering a property downturn, could have significant implications for the aluminium market by potentially boosting construction and, consequently, aluminium demand.
Technical Analysis and Market Trends
From a technical standpoint, the aluminium market is witnessing short covering, with an 18.15% decrease in open interest and a price increase of 1.85 rupees. Technical analysis indicates support at 196.7, with potential further testing of 194 if breached. Conversely, resistance is anticipated at 201.1, with a breakthrough possibly leading to a test of 202.8.
Conclusion
The aluminium market is at a fascinating juncture, influenced by global production outputs, policy changes, and technical market trends. As we move forward, market participants will need to monitor these factors closely to navigate the volatile landscape of aluminium trading successfully. The future outlook remains cautiously optimistic, with policy support and market dynamics offering potential growth avenues for aluminium demand.
