Aluminium Dropped Amid A Pessimistic Industrial Sentiment

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Aluminium Dropped Amid A Pessimistic Industrial Sentiment
Credit: © Reuters.

Aluminium closed with a slight decline of -0.5%, settling at 199.05, as a pessimistic industrial sentiment in China, the world's largest consumer of base metals, continued to weigh on the market outlook. Macroeconomic headwinds persist in China, casting shadows on the demand prospects for aluminium and other base metals. The share of available aluminium stocks of Russian origin in London Metal Exchange (LME)-approved warehouses remained stable at 90% in January. This comes amidst broader sanctions against Moscow over its actions in Ukraine, with the UK restricting physical delivery of Russian-made base metals from mid-December. 

Despite these restrictions, Russian metal continued to flow through LME-registered warehouses. The data showed a decline in Russian primary aluminium stocks on LME warrant to 286,750 metric tons in January from 338,375 in December. Federal Reserve policymakers are anticipated to delay any interest rate cuts until June, as indicated by traders adjusting their expectations after a government report revealed higher-than-expected consumer inflation of 3.1% in January. The market sentiment leans toward a more cautious approach by the Fed in response to inflationary pressures. 

From a technical perspective, the market witnessed long liquidation, evident in a 2.4% drop in open interest to 2807, while prices declined by -1 rupees. Aluminium currently finds support at 198.3, and a breach could test 197.6 levels. On the upside, resistance is anticipated at 200.3, with a move above potentially pushing prices towards 201.6.


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