Aluminium market rises on short covering, open interest drops 11.1%

Aluminium on MCX settled up 0.75 per cent at 107.4 driven by expectations for demand recovery in Chinese aluminum market. The first half of the year will not see massive restarts of idled aluminum capacity and commissioning of new aluminum capacity in China. At its annual policy meeting over the weekend, China set a growth target of 6.5 percent as the baseline of a range through 2020, less than the 6.9 percent pace last year.

Premier Li Keqiang acknowledged there would be some difficult battles ahead as he outlined plans to clean up the environment, boost innovation, further urbanize and cut excess capacity. Last week investors welcomed the move by China's central bank to reduce the amount of cash that banks must hold as reserves for the fifth time since February last year. Some big aluminium producers are seeking an increase in surcharges of 14-18 percent for physical delivery to Japanese buyers for April-June primary metal shipments, sources said. Investors worried about the risk of a new global recession are hoping that data over the coming week will show that some momentum remains in the world economy, eight years into its slow recovery from the financial crisis.

China imported 4,500 mt of primary aluminum in December 2015, down from 11,700 mt in November, Customs data showed. The decline was partly due to yuan’s depreciation. Besides, orders under tolling trade dropped because of Christmas holiday, another reason behind lower imports. Technically market is under short covering as market has witnessed drop in open interest by -11.1 per cent to on MCX settled at 2474 while prices up 0.8 rupee, now Aluminium is getting support at 106.9 and below same could see a test of 106.3 level, and resistance is now likely to be seen at 107.9, a move above could see prices testing 108.3.