Aluminium fell as China's manufacturing activity unexpectedly shrank in October.

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Aluminium fell as China's manufacturing activity unexpectedly shrank in October.
Credit: © Reuters.

Aluminium prices experienced a 0.24% decline, closing at 206.5, as China's manufacturing sector unexpectedly contracted in October. This setback raised concerns despite recent signs of economic recovery in the world's second-largest economy. China's official NBS Manufacturing PMI dropped to 49.5 in October, missing market expectations and signalling a decline from the previous month. The Non-Manufacturing PMI also decreased to 50.6, and the Composite PMI Output Index fell to 50.7, the lowest since December 2022. 

These figures underscore uncertainty about China's economic rebound, leading to calls for more policy support from Beijing. One significant factor impacting aluminium prices is the reduction in production by Chinese smelters in Yunnan province during the dry season. Reduced availability of hydropower resources has prompted four smelters to cut production by 9% to 40% of capacity, with others considering similar moves. Many smelters had shifted operations to Yunnan due to the cost-effectiveness and environmental benefits of hydropower compared to coal. 

From a technical perspective, the market is witnessing long liquidation, with a 3.78% decrease in open interest, settling at 3054. Prices have dropped by 0.5 rupees. Aluminium finds support at 206.3, with potential for a test of the 206 level. On the upside, resistance is expected at 207, and a break above this level may lead to testing at 207.4.

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