Aluminium weakness, market under long liquidation: Kedia

Aluminium settled down -0.21% at 117.25 due to rise in dollar as major economic indicators from the US were mixed. US final GDP growth for Q3, published on Tuesday, came in at 5.0%, well above expectations and the biggest rise in 11 years. This demonstrates rapid growth in the US economy and has soothed concerns over the world’s largest economy. The resulting stronger expectation for the US Federal Reserve to raise interest rates earlier than anticipated sent the US dollar index up sharply above 90, a high not seen since 2006. The latest report published by the World Bureau of Metal Statistics (WBMS) indicates that global primary aluminum market has recorded a deficit during the initial ten months of the year.

As per the report, the market turned into a deficit of 542,000 tons when matched with the surplus of 570,000 reported during entire year 2013. The production of primary aluminum was up by 1,398 kt during the ten-month period from January to October this year. The reported stock of produced metal has declined by 173,000 tonnes during the month of October. The stocks at the end of the ten-month period stood at 6,564 kt. It must be noted that the stock levels at the end of 2013 had stood at 7,171 kt. Global production increased by 3.5%, whereas consumption rose by 2,212 kt to 41.43 million tonnes during the period from January to October this year.

Investors in China’s domestic market will turn cautious without guidance from the LME during the Christmas holiday. Technically market is under long liquidation as market has witnessed drop in open interest by -10.21% to settled at 2497, now Aluminium is getting support at 116.8 and below same could see a test of 116.4 level, and resistance is now likely to be seen at 117.9, a move above could see prices testing 118.6.