Aluminium Seen Supported By Chinese Policy Support

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Aluminium Seen Supported By Chinese Policy Support
Credit: © Reuters.

Aluminium prices closed 0.54% higher at 204.15, driven by optimism surrounding Chinese policy support following a seasonal lull. China's central bank governor, Pan Gongsheng, announced a 50 basis points reduction in the amount of cash that banks must hold as reserves starting February 5, marking the first such move in the new year. Additionally, the central bank plans to cut re-lending and re-discount interest rates by 25 basis points for the rural sector and small firms, effective January 25, as part of efforts to address multiple economic challenges. 

The World Bureau of Metal Statistics (WBMS) reported a global primary aluminium production of 5.8613 million tons in November, with consumption at 5.9714 million tons, resulting in a supply shortage of approximately 80,000 tons. Despite a surplus of around 600,000 tons in the first 11 months of the previous year, December witnessed a 2.1% year-on-year increase in global primary aluminium output to 6.041 million tonnes, according to the International Aluminium Institute (IAI). China's notable 28% increase in aluminium imports in 2023, as indicated by customs data, reflects robust demand and higher prices in the world's largest consumer market for metal. 

Technically, the market showed signs of short-covering, evidenced by a 4.11% drop in open interest to 3712, coupled with a modest price increase of 1.1 rupees. Aluminium finds support at 203.1, and a breach could lead to a test of 202, while resistance is anticipated at 205, with a potential breakthrough paving the way for testing 205.8.

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