Aluminium prices rising slowly but steadily- right time to invest?

Aluminium price increases this year have been minimal. Even when metals prices were rising across the board in the first quarter, aluminium was the laggard as oversupply still kept investors away from buying it and construction demand remained tepid. However, the metal is rising slowly but steadily as investors see an opportunity to buy aluminium when prices fall short-term. Thanks to Chinese stimulus that construction demand has shot up and aluminium prices with it. A recovery in demand is a key factor supporting aluminium prices this year.

Excess aluminium production in China is damaging the prospects of aluminium producers in the rest of the world, purely because of the size of China’s massive aluminium industry. China is the world’s largest producer accounting for 54.4 per cent of global primary aluminium output in April.

China has been exporting excess production of both steel and aluminium in the form of semi-manufactured products. The development of the global automotive industry has a positive impact on aluminium prices. The current perspectives of the global automotive industry assume a significant growth in aluminium demand in the mid-term.

Trade figures this year showed China’s relatively strong appetite for aluminium. Higher demand means exporting less as Chinese companies are consuming more aluminium domestically. China’s exports of unwrought aluminium and aluminium semis were 420,000 metric tonnes in May. From January to May, exports are down 7.9 per cent compared to the same period last year.

In MCX, Aluminium on daily chart had taken support on its 200 day moving average around INR 102.30 per kg and rallied till INR 110.45 per kg. It failed to cross its previous swing high of INr 111.65 per kg and now is trading around INR 108.80 per kg. Fresh breakout can come above INR 112 per kg. It seems like aluminium may first come around INR 106 per kg. If it trades below that, investors can expect testing again the support of 200 day moving average around INR 102.50 per kg. If Aluminium stays above INR 106 per kg then one should initiate long position with INR 106 per kg as its stoploss and target of INR 111.50 per kg. Investors for long term horizon should wait in aluminium as it is trading in the broad range. Breakout above INR 112 per kg will give substantial return for long term investors. Aluminium prices are acting strong, thanks to a recovery in demand, a weak dollar and improved sentiment in commodity markets.”