Aluminium market rises on short covering, open interest drops 10.43%

Aluminium settled up 0.15% at 100.70 as other metals rallied also support seen after the update that China's aluminium smelters have pledged to shut more production this month and not to add any new capacity in 2016, but market participants say this would do little to dent global overcapacity that has ballooned as the world's No.2 economy slows after decades of breakneck growth. Demand in China that alone accounts for a major portion of the industrial metal demand has slowed down due to the country's tepid property market and weaker infrastructure investment growth.

China's economic growth has cast a shadow on investors' view of commodities demand and, as a result, brought down demand for metals, leading to price weakness. China's GDP in the third quarter slowed down to a six-year low to 6.9%, lower than the 7% growth in the first half of the year despite repeated interest rate cuts and other stimulus measures. It was the slowest since the 6.2% recorded in the first quarter of 2009 during the global recession. Lastweek aluminum rallied hitting its highest level since October 20, being supported by continued squeeze by a dominant holder.

US metal futures jumped $12 compared to the previous session’s end price to settle at $1,548 a tonne, as the news that revealed the inventories declined 5,775 tonnes, while cancelled warrants dropped 13,275 tonnes to 1,097,750, which supported prices going up at the London Metal Exchange. Technically market is under short covering as market has witnessed drop in open interest by -10.43% to settled at 2139 while prices up 0.15 rupee, now Aluminium is getting support at 99.6 and below same could see a test of 98.3 level, and resistance is now likely to be seen at 102.2, a move above could see prices testing 103.5.