Aluminium prices experienced a notable increase, closing up by 2.77% at Rs 317.4, as investors recalibrated their expectations regarding supply constraints in light of robust global demand. Sentiment was bolstered by a strengthening confidence in China’s macroeconomic outlook, following the central bank’s reaffirmation of its dedication to an accommodative policy stance.

This includes anticipated reserve requirement and interest rate reductions in 2026, as well as initiatives aimed at enhancing domestic demand and stabilizing growth. Policy signals designed to curb overcapacity in metal production have provided additional support for prices, as China is anticipated to exceed its 45-million-ton output limit, thereby constraining the potential for smelter expansion in the coming year. Supply-side constraints continued to be a significant factor.

Chinese smelters, limited by output restrictions, redirected a greater volume of material to the domestic market, resulting in a 9.2% year-on-year decline in exports for November. Globally, elevated energy costs, equipment malfunctions, bauxite procurement difficulties, and geopolitical uncertainties have hindered operations in nations such as Iceland, Mozambique, and Australia. Despite a 10.8% increase in SHFE aluminium inventories since late December, there has been a 5.2% decrease in stocks at major Japanese ports, suggesting a contraction in availability in certain consuming areas.

From a technical standpoint, the market is experiencing short covering, as evidenced by a 0.93% decline in open interest to 3,300 contracts, accompanied by a price increase of Rs 8.55. Aluminium is currently encountering support around Rs 312; a decline beneath this level may lead to a test of Rs 306.5. On the upside, resistance is identified at Rs 320.5, with a movement above this level potentially leading to further gains toward Rs 323.5.