Aluminium Gained On Low-Level Buying

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Aluminium Gained On Low-Level Buying
Credit: © Reuters.

Aluminium prices edged up by 0.32% yesterday, settling at 201.15, driven by low-level buying activity amidst a lack of fresh market-moving catalysts and subdued trading ahead of an extended public holiday in China, the world's top consumer of aluminium. However, market sentiment remained cautious as traders assessed various factors influencing the aluminium market. One significant development affecting aluminium trade was the decline in the volume of aluminium product exports from China to the European Union covered by the bloc's carbon border tariff. 

The CNIA reported a 30% decrease in such exports in 2023, following the launch of the CBAM by the EU. The CBAM aims to prevent more polluting foreign products from undermining the EU's green transition. China's official Purchasing Managers' Index (PMI) data revealed a contraction in factory activity for the fourth consecutive month, indicating ongoing challenges in the manufacturing sector. However, the Caixin China General Manufacturing PMI unexpectedly remained at 50.8 in January 2024, beating market forecasts and suggesting growth in factory activity for the third consecutive month. 

From a technical standpoint, the aluminium market observed short covering, indicated by a drop in open interest by -6.56% alongside a slight increase in prices by 0.65 rupees. Support levels are identified at 199.9 and 198.5, while resistance is likely at 202, with a potential breakout leading to prices testing 202.7. These technical indicators suggest a mixed sentiment in the aluminium market, with traders closely monitoring both fundamental factors such as trade dynamics and manufacturing activity, as well as technical levels to gauge market direction amidst prevailing uncertainties.

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