Aluminum Prices Rise Amid Economic Concerns

Aluminium Ingot

12 Aug 20242 Min ReadDaily Market Report

Aluminum prices increased by 0.54% to ₹213.05, recovering from recent lows driven by U.S. economic concerns and weak demand from China. Global aluminum production is rising, but demand remains weak. Technically, the market shows new buying interest with support at ₹211.3 and resistance at ₹214.2, indicating a potential for further gains.

Price

As of Friday, the LME opened at $2,272/ton and closed at $2,284/ton. Today, the market opened at $2,292/ton.
On Friday, the SHFE opened at 18,900 Yuan/MT and closed at 19,050 Yuan/MT. Today, the market opened at 19,125 Yuan/MT.
On the last trading day, the MCX closed at ₹213.05/Kg. Today, the market opened at ₹213.80/Kg.

Demand and Supply

Aluminum prices rose by 0.54% to ₹213.05, recovering from a recent dip due to U.S. economic concerns and weak demand from China. The market has been volatile, driven by fears of a potential U.S. recession that triggered a sell-off in risk assets. However, the dollar is expected to strengthen, as markets may have overestimated the likelihood of multiple Federal Reserve interest rate cuts this year.
Global aluminum production is increasing while demand remains weak. July's global aluminum production is expected to be about 3.68 million metric tons, with high social inventories. In China, increased rainfall in Yunnan has improved hydropower availability, boosting smelter production. Despite this, China's manufacturing activity contracted faster in July, and service sector growth slowed to an eight-month low, underscoring ongoing economic challenges.
Primary aluminum production worldwide grew by 3.2% year-on-year in June to 5.94 million tons, with a 3.9% increase in the first half of 2024 to 35.84 million metric tons. China’s output rose by 7% in the first half of the year, reflecting robust production growth despite weak demand. However, economic difficulties persist, particularly in China, where manufacturing activity contracted, and service sector growth slowed in July, pointing to continued economic challenges.
Technically, the aluminum market is seeing new buying interest, with open interest up 2.38% to 4,303 contracts. Prices have increased by ₹1.15, with current support at ₹211.3. If this support level is breached, prices may test ₹209.4. On the upside, resistance is expected at ₹214.2, with potential for prices to reach ₹215.2 if the upward trend continues.

News

India has seen a weekly decline in imported aluminum scrap prices, with reductions of up to 1.6% across all grades, influenced by stable LME aluminum prices. The LME's three-month aluminum prices have remained steady, fluctuating between $2,225 and $2,250 per tonne, with LME warehouse stocks at 922,000 tonnes, keeping prices close to three-month lows.
In Europe, the holiday season has created a gap between bid and offer prices. Tense scrap from the UAE has dropped by $30 per tonne to $1,700 per tonne, while Zorba 95/5 from the UK has decreased by $15 per tonne to $1,960 per tonne CFR West Coast, India.
Domestically, prices for tense scrap have fallen by ₹1,000 per tonne in both Delhi and Chennai, now at ₹174,000 per tonne ex-Delhi NCR and ₹175,000 per tonne ex-Chennai. This drop reflects the overall downward trend in LME aluminum prices and current sluggish market conditions.

Expert's Opinion

In August, downstream aluminum consumption shows signs of stabilizing and recovering, and aluminum ingot inventories are expected to peak gradually. In the short term, both macro and fundamental factors are converging, and aluminum prices may bottom out.