Aluminium Prices Dropped Due To Increased Stocks In LME-Approved Warehouses.

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Aluminium Prices Dropped Due To Increased Stocks In LME-Approved Warehouses.
Credit: © Reuters.

Aluminium prices experienced a decline of -1.82%, settling at 208.25, primarily influenced by a notable increase in stocks in LME-approved warehouses, rising by 28% to 566,375 tons since December 6. This surge in inventory has impacted market sentiment, particularly for a metal widely used in the power, construction, and packaging industries. Despite this, the downside appears limited as aluminium found support due to concerns about the supply of feedstock alumina. A blast in Guinea last month damaged fuel stocks at the main terminal, affecting the supply of alumina, a critical raw material derived from bauxite. 

The Caixin China General Manufacturing PMI for December 2023 inched up to 50.8, surpassing market forecasts and indicating the highest reading since August. Output experienced the most substantial growth in seven months, and new orders rose at the fastest pace since February. However, new export orders fell at the softest pace in six months. Official data revealed a further contraction in Chinese manufacturing activity in December, while a private survey suggested an unexpected acceleration in the country's manufacturing sector growth. This has led to speculations that the People’s Bank of China might ease policy further in 2024 to support the economic recovery. 

From a technical standpoint, the market is undergoing long liquidation, with a drop in open interest by -7.99%. Aluminium is finding support at 206.4, and a breach below this level could test 204.3. On the upside, resistance is likely at 212, and a move above could lead to testing 215.5.

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