Aluminium Dropped As China's Economy Is Shaky With Deflationary Pressures

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Aluminium Dropped As China's Economy Is Shaky With Deflationary Pressures
Credit: © Reuters.

Aluminium prices faced a decline of -0.74%, settling at 201.6, reflecting concerns about China's economic conditions. China's central bank is expected to increase liquidity and reduce a key interest rate as part of efforts to stabilize the economy facing deflationary pressures. Despite a slight uptick in exports, weak domestic activity remains a challenge for a quick turnaround. In the aluminium market, the premium for shipments to Japanese buyers from January to March was set at $90 per metric ton, down 7% from the previous quarter.

This decline is attributed to sluggish demand, with the figure marking the lowest since the first quarter of 2023 and falling below initial offers from global producers. Japan, as Asia's largest aluminium importer, plays a significant role in setting benchmarks for the region. Aluminium stocks at major Japanese ports were at 330,000 tons in November, exceeding the healthy range of 250,000-300,000 tons. This surplus occurred despite a 27% year-on-year drop in Japan's import of primary aluminium ingots over the period from January to November.

Technically, the aluminium market is under fresh selling pressure, evidenced by a gain in open interest by 0.09% to settle at 4255. Prices are currently finding support at 200.7, and a breach below could lead to a test of 199.9 levels. On the upside, resistance is likely at 202.8, with a move above potentially pushing prices to test 204.1.

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