Aluminium on MCX settled up 1.46% at 138.90 on short covering after the news that Unionized workers at Alcoa (NYSE:AA) Corp's aluminium smelter in Becancour, Quebec rejected the company's latest contract offer which can once again hype the concerns over production outages. Earlier data from China, which accounts for 40% of global metal demand, showed consumer prices accelerated to 1.8% y/y from 1.8% in November, missing expectations of 1.9%. Chinese producer prices slowed down to 4.9% y/y from 5.8% in November, beating forecasts of 4.8%. Aluminium scrap is set to see tightened supply in 2018 as environmental protection policies weigh in further.
Such tightness would be mostly felt around Chinese New Year and the fourth quarter when demand increases. In fact, secondary aluminium producers have started restocking ahead of the Chinese New Year holiday but their inventory levels hardly grew. The tightening supply of aluminium scrap is mainly due to environmental protection measures and policy changes on imported materials. Last year, construction activities were limited on account of air pollution. Aluminium scrap supply from dismantling and construction activities therefore reduced especially as the heating season started. In addition, policies such as cancellation of agents for imported aluminium scrap, requirements on increasing metal content in scrap material imports, and ban on imported aluminium scrap in category seven have all contributed to less availability.
Technically market is under short covering as market has witnessed drop in open interest by -8.62% to settled at 2185 while prices up 2 rupees, now Aluminium is getting support at 137.7 and below same could see a test of 136.4 level, And resistance is now likely to be seen at 139.7, a move above could see prices testing 140.4.
Trading Ideas:
- Aluminium trading range for the day is 136.4-140.4.
- Aluminium rose tracking gains in LME prices ended up 1.4 percent at $2,182 amid fall in the dollar.
- U.S. aluminium products makers sought new trade protections against Chinese imports, accusing of evading U.S. anti-dumping and anti-subsidy duties.
- China’s producer price index (PPI) in December rose 4.9% from the same month a year ago, higher than the expectation at 4.8%.