Aluminium bears can be vibrant in short term

The year ending is nearby and the prices of Aluminium have seen some sharp sell off, almost tarnishing the efforts of the bulls during the years. The situation during the year ending is making everyone juxtaposed for the future. The prices are crumbling as Aluminium has seen outperformances during the year due to physical tightness. On the other hand, the production numbers is worrisome. The production of Aluminium reached record highs in the month of November. Contrasting signs from US and China are on the radar of stakeholders. While US economy is recovering, Chinese economy is showing deterioration signs.

However the only reason for the Aluminium markets to worry is the gains in the world Aluminium markets to all-time highs. World Aluminium markets showed gains in the production figures. The production is at all-time high in November. The rise was supported by China and rest of Asia. Meanwhile, the decline in China passenger car markets will again be pressurizing the metal that thrives on the back of Automobile sales that use Aluminium as a metal to increase average and tensile strength.

MCX Aluminium has seen a sharp appreciation in the year, and if everything shapes as per the current trend, the metal is likely to be an outperformer in the year 2014. The prices have seen gains of 11.5% so far till December in domestic futures market. Annual demand for Aluminium in 2014-15 is expected to show gains of 6 to 7%. The CAGR of primary Aluminium demand is expected to be 3.4% between 2013- 2018. The growth is expected to come from US, and Europe. Demand from China is also expected to be growing by 8% as per an estimate from Aluminium major Hindalco. Aluminium consumption is expected to grow by 5% in India as well.

On LME, the spot prices have been in the region of $ 2054 per tonne by December, compared to $ 1728 per tonne by the start of 2014. This marks a gain of 18.86%. For short term Aluminium can be in a range of $1900-2200 per tonne. On the other hand, MCX Aluminium that has already seen a decent run so far in the year can move beyond Rs 120 per kg for short term before recovery towards its potential targets of Rs 140. The prices have seen gains of 11.5% on MCX so far.