MCX Aluminium Prices Dip Amid Rising Global Supply and Tariff Threats

Key Takeaways

• Price Drop: MCX aluminium prices dropped by 1.06% to Rs 252.55, reflecting market pressure from rising global supply.
• China's Dominance: China’s aluminium production grew by 4.2% in December, while exports increased 17% year-on-year in 2024.
• Sanctions on Russia: The EU's potential sanctions on Russian aluminium could disrupt exports and affect global supply chains.
• Tariff Challenges: Alcoa considers redirecting Australian output to the US as Trump’s tariff threats loom over Canadian aluminium.
• Support and Resistance: Experts predict immediate support at Rs 251.4 and resistance at Rs 254 for aluminium prices.

Aluminium Price:

As of last day, MCX closed at Rs 251.00/kg. Today, the market opened at Rs 251.65/kg.

Aluminium Demand & Supply

• Aluminium prices dropped by 1.06% to Rs 252.55, pressured by an increase in global supply and higher stock levels. According to the International Aluminium Institute (IAI), global primary aluminium production grew by 3% year-on-year to 6.236 million mt in December. In Japan, aluminium inventories at the three major ports rose by 13.2% to 323,600 mt in December, signalling weaker demand. In China, aluminium production increased by 4.2% year-on-year to 3.77 million mt in December, driven by new capacity in Xinjiang. However, daily output averaged 121,612 mt, a 1.7% decline from November.
• Meanwhile, the European Union is preparing to include Russian primary aluminium in its 16th sanctions package, limiting Russian exports. Despite this, China’s aluminium exports grew by 17% year-on-year to 5.5 million mt in the first ten months of 2024, showcasing its dominance in the global market. However, rising production costs in China have led to industry-wide losses of 687 yuan per mt, marking the first such losses in three years.

Aluminium News

• Following Donald Trump's tariff threat after his second presidential inauguration on January 20, aluminium industry leaders, both domestically and internationally, are considering strategic adjustments in overseas trade. Alcoa, a major US aluminium producer, is contemplating redirecting its Australian aluminium production to the US in response to the proposed tariff on Canadian aluminium imports. Alcoa's CEO, William Oplinger, believes this shift could help avoid tariff payments.
• Industry leaders are also concerned about potential disruptions due to tariff threats on Canada, China, Mexico, and the EU, which could lead to limited metal availability, higher prices, and a rise in end-user product costs by $1.5 to $2 billion. Alcoa's Canadian output, which amounts to 900,000 mt of its total 2.2 million mt annual production, primarily serves the US market.

Expert Opinion

The market experienced long liquidation, causing open interest to fall by 21.99% to 1,348 contracts. Aluminium has immediate support at Rs 251.4, and a break below this could lead to a test of Rs 250.2. On the upside, resistance is at Rs 254, with prices potentially reaching Rs 255.4, if this level is surpassed.