Aluminium prices experienced a decline of 1.35%, settling at Rs 266.85, influenced by lackluster macroeconomic indicators from China and diminishing expectations regarding a rate cut by the U.S. Federal Reserve. In October, China’s primary aluminium production reached 3.8 million tonnes, reflecting a year-on-year increase of 0.4%. However, this figure represents a 9% decline from September, suggesting a contraction in supply conditions. The downside appears constrained, as Chinese smelters near government-imposed capacity limits, which raises concerns regarding potential output restrictions in the forthcoming months.

China’s recent economic indicators revealed increasing demand pressures, as industrial output expanded by a mere 4.9% and retail sales increased by 2.9%, marking the slowest growth rates in over a year. New home prices decreased by 0.5% on a month-to-month basis, while new bank loans experienced a significant decline, indicating subdued credit demand and persistent stress within the property market. Despite this softness, aluminium received support from persistent global supply-side disruptions. Smelter outages in Iceland, refinery shutdowns by Alcoa in Australia, and curtailments at Century Aluminium have tightened the supply outlook. Physical market tightness was also reflected in rising premiums, with the European aluminium premium climbing to $328, nearly double the levels observed in June.

In the interim, supported by anticipations of a more constrained supply, there has been a notable increase in fund inflows into LME aluminium. Banks exhibited a divergence in their forecasts: Goldman Sachs adjusted its long-term outlook downward, whereas ANZ increased its short-term target to $2,900 per tonne, citing a rise in global manufacturing demand.

Aluminium is currently experiencing a phase of long liquidation, evidenced by a 4.94% decline in open interest, which now stands at 2,403. Support is positioned at Rs 265.5, with additional downside potential toward Rs 264. Conversely, resistance is identified at Rs 269.6, and a breakout could propel prices toward Rs 272.2.