Aluminium fell as China’s primary output rose 0.4% in October

China's weak macro signals and the fading hope of the US Fed rate cut have resulted in aluminium price drop of 1.35 per cent, settling at USD 266.85.

In addition, supply concerns due to a 9 per cent month-on-month decline in China's October primary aluminium output, standing at 3.8 million tonnes, also contributed to the aluminium price fall. Downside also remained limited due to the Chinese smelters' focus on nudging government-imposed capacity limits, which is directly linked with the rising concerns over the compelled output for the coming months. 

Moreover, with the slowest growth in industrial output by about 4.9 per cent, with the retail sales rising at 2.9 per cent, also posed pressure on demand, pulling down the aluminium price. While new home prices dropped by 0.5 per cent, new bank loans slumped sharply, indicating weak credit demand and the continuous stress upon the ongoing property market. 

Also read: China's alumina production with 8% growth rate races ahead of primary aluminium, signalling surplus pressure

Tightened supply outlook also comes from Iceland's smelter outages, Century Aluminium curtailments, and Alcoa's refinery shutdown in Australia. Concurrently, in the rising premiums, the tightness of the physical market was also reflected, where the premiums of the European aluminium climbed to USD 328, nearly double the levels seen in June. 

Nevertheless, the fund inflows into the London Metal Exchange (LME) aluminium have significantly risen, backed by the expectations of a tighter supply. A mixed outlook is seen by the banks, with Goldman Sachs revising its long-term forecast downward. Concurrently, ANZ widened its target outlook for the short-term, aiming for USD 2,900 per tonne whilst observing improved global manufacturing demand. 

Aluminium is deemed to be under the long liquidation, where the open interest is USD 2,403, down by 4.94 per cent. The support is seen at USD 265.5 with expected further decline to USD 264. Resistance is recorded at USD 269.6 alongside a breakout, which may lift the price to USD 272.2. 

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