Aluminium prices rose by 1.16% to settle at 226.55, driven by increased fund buying and a shortage of raw materials in China. The market sentiment has shifted positively, with some commodity trading advisor (CTA) funds beginning to build net-long positions in aluminium. This bullish trend is further supported by China's unexpected growth in aluminium imports, despite strong domestic production. In July, China exported 146,708 tons of alumina, marking a 9.6% year-on-year increase, with a significant portion directed to Russia. Additionally, China imported 129,898 tons of primary aluminium, an 11.5% increase from the previous year, indicating robust demand. The cost of raw materials for aluminium production has also risen, with China's alumina futures reaching a near three-month high due to increased consumption.
Supply constraints have been exacerbated by production cuts at alumina refineries operated by Alcoa (NYSE:AA) and Rio Tinto (LON:RIO) in Australia. Over 30% of alumina inventories were withdrawn from warehouses monitored by the Shanghai Futures Exchange (ShFE) in the past three weeks, driven by improved profitability in primary aluminium production. China's aluminium output in July reached its highest level in more than two decades, with 3.68 million metric tons produced, a 6% year-on-year increase. This surge in production is attributed to new projects in Inner Mongolia and continued strong production in other key regions. Globally, primary aluminium output in July rose by 2.4% year-on-year to 6.194 million metric tons, with China's contribution up by 2.5%.
Technically, the aluminium market is experiencing short covering, with a 15.68% drop in open interest to 2,737 contracts as prices rose by 2.6 rupees. Aluminium is currently supported at 224.1, with a potential downside towards 221.6 levels. On the upside, resistance is expected at 228.4, and a move above this level could see prices testing 230.2.