Aluminium may trade 97-101.4 range, support at 98

Aluminium settled down -1.49% at 98.85 tracking weakness from LME aluminium which ended down 2.2 percent at $1,473, having hit a month low earlier at $1,464 despite news that Malaysia is pushing to suspend bauxite mining due to concerns about its impact on the environment, threatening to interrupt supply of the aluminium-making ingredient to China. Earlier lastweek aluminium gained after two separate indicators of manufacturing in China showed factory activity in contracted again, pointing to faltering demand.

The downturn came after China's official purchasing managers index stayed in contraction for the fifth straight month in December according to Friday's data, while a separate private index of manufacturing out Monday also showed a decline, posting a weaker-than expected level of 48.2. Investors are increasingly concerned about the Chinese economic slowdown. The world's number two economy expanded by 6.9% of GDP in the third quarter, dropping below the 7% mark for the first time since the global financial crisis of 2008-2009. Spot premiums for Japanese aluminum imports at $105-$115/mt plus LME cash CIF Japan, up from $100-$110/mt last Thursday, as fresh buying interest emerged amid thin spot seaborne cargo availability.

There were at least two Japanese buyers with interest for spot material in addition to quarterly contract supplies. There is a good chance for China to raise export rebate on deeply processed aluminum semis in 2016 after dosing so during the 2008-2009 global financial crisis. Cancellation of export duty on aluminum ingot and intermediate aluminum products runs against China’s intention of encouraging exports of deeply processed products. Technically market is getting support at 98 and below same could see a test of 97 level, and resistance is now likely to be seen at 100.2, a move above could see prices testing 101.4.