Aluminium market under long liquidation, open interest drops 17.62%

Aluminium prices pared its gains to settle in negative zone due to oversupply and a massive inventory overhang. Aluminium price has risen over the past month, supported by a tightening of the ex-China balance, higher oil prices, and a weaker dollar. Chinese output and semi-fabricated export growth to accelerate at current prices, eventually driving ex-China prices down by about 15 percent to $1,350/t on a 12-month view. U.S. consumer spending rose solidly in January while fourth-quarter economic growth was revised up to 1 percent, higher than expected. G20 policymakers meeting in Shanghai sought common ground on how to reboot a struggling global economy in the face of renewed financial and political risks.

Setting the tone for the Shanghai meeting of the Group of 20, China's central bank chief, Zhou Xiaochuan, said Beijing still had the room and tools to support the world's second largest economy. The preliminary statistics released by the Aluminum Association indicates marginal rise in aluminum demand in the US, Canada during 2015. The producer inventories in Dec ’15 were up slightly when matched with the previous month. Also, aluminum scrap purchases by the industry during Dec ’15 dropped marginally year-on-year.

The aluminum demand in the US and Canada totaled 25.74 billion lb during entire year 2015, marginally higher by less than 1% when compared with the demand in 2014. The above figure includes shipments by domestic producers and imports. Higher property prices in large Chinese cities helped boost sentiment. Technically market is under long liquidation as market has witnessed drop in open interest by -17.62% to settled at 1711, now Aluminium is getting support at 107.8 and below same could see a test of 107.1 level, and resistance is now likely to be seen at 109.4, a move above could see prices testing 110.3.