Aluminium Prices Fall Amid Resumption of Chinese Production

Aluminium prices declined by 0.98%, settling at 257.65, as production in China gradually resumed. Domestic operating capacity is expected to rise in February, following a 3.8% year-on-year increase in January's aluminium production, though output dipped 0.3% from the previous month. While most smelters maintained stable production, Shanxi recorded a reduction of 20,000 metric tons per year.

In January, Russian-origin aluminium stocks in London Metal Exchange (LME) warehouses increased to 67% of total available stocks, up from 56% in December, while Indian-origin stocks declined. The European Union's proposal to phase out Russian aluminium imports over the next year has added uncertainty to the market.

On the supply side, global primary aluminium production in December rose 3% year-on-year to 6.236 million tonnes, according to the International Aluminium Institute (IAI). Japan’s aluminium stocks at major ports grew 13.2% from the previous month, reaching 323,600 metric tons by the end of December. China’s aluminium exports climbed 17% year-on-year in the first ten months of 2024, totaling 5.5 million tons. Despite increased production, Chinese smelters faced profitability challenges, with an average loss of 687 yuan per ton, marking the first negative margin in three years. China’s total aluminium output for 2024 reached 44.01 million metric tons, up 4.6% year-on-year.

Market data indicates long liquidation, with open interest dropping 16.24% to 3,512 as prices fell by 2.55 rupees. Aluminium has support at 255.8, with a further decline potentially testing the 253.8 level, while resistance is seen at 261, with a move above this level possibly pushing prices toward 264.2.