Fundamentals

Aluminium market under long liquidation, open interest drops 7.26%

Aluminium is getting support at 110 and below same could see a test of 109.3 level, and resistance is now likely to be seen at 111.7, a move above could see prices testing 112.7.

February 24, 2015 12:12

MUMBAI: Aluminium settled down -0.54% at 110.75 as overcapacity in China’s aluminium sector has depressed domestic prices, and is undercutting premiums — the surcharge for physical metal — in global markets, as China-based traders step up semis exports. In December, Chinas north-western province of Xinjiang accounted for 21% of total Chinese aluminium production, just above Novembers figure, and still remains Chinas largest aluminium producing province.

Henan, formerly the biggest aluminium producing region, maintained its share of 13% from November to December, well below historic highs. In CY14, Chinas aluminium output lifted 9.0% y/y to 23.9Mt, below the 11.3% y/y growth recorded in 2013. On Tuesday, markets will focus on testimony by Federal Reserve Chair Janet Yellen before the Senate Banking Committee amid keen interest over whether the Fed will hike rates in June. Volumes on the LME were still relatively thin as top buyer China remained on a week-long break for the Lunar New Year holiday. China’s stock, bond, foreign exchange and commodity futures markets will resume trade on Feb. 25.

Also Premiums offered for aluminum imported into the U.S. East Coast have fallen sharply in the past week, as sellers aggressively targeted the U.S. market amid sluggish demand in Europe and Asia. Technically market is under long liquidation as market has witnessed drop in open interest by -7.26% to settled at 2697 while prices down -0.6 rupee, now Aluminium is getting support at 110 and below same could see a test of 109.3 level, and resistance is now likely to be seen at 111.7, a move above could see prices testing 112.7.

Trading Ideas:

—Aluminium trading range for the day is 109.3-112.7.

—Aluminium dropped as the overall mood remains gloomy, given China’s slowing growth and struggling property sector.

—Greece will present its economic reform plans to the euro zone on Tuesday, a government official said

—Overcapacity in China’s aluminium sector has depressed domestic prices, and is undercutting premiums, as China-based traders step up semis exports.

Courtesy: Kedia Commodity