Aluminium prices concluded the trading session down by 1.73% at Rs 346.80, influenced by enhanced supply expectations from the Middle East and the anticipated restoration of smelting capacity affected by conflict, which alleviated fears of regional shortages. This occurred in the context of stalled peace talks between the U.S. and Iran, alongside ongoing threats to maritime traffic in the Strait of Hormuz. Emirates Global Aluminium reported that its Al Taweelah smelter is currently functioning at 18% of its capacity and anticipates a return to prior output levels by early 2027. This development is expected to enhance supply from a region that previously contributed approximately 10% to global aluminium production before the onset of the conflict.

Australia’s largest aluminium smelter has obtained a $1.8 billion government bailout, which will facilitate the continuation of its operations. However, the downside remained constrained by diminished feedstock production at Norsk Hydro’s Brazilian facility and consistently low visible inventories. The European physical premium has decreased to $487 per tonne from a peak of $621 in May, yet it is still 36% higher compared to levels prior to the onset of the war. LME aluminium inventories decreased to 254,900 tonnes from 262,650 tonnes on August 3, reflecting a significant drop from 416,775 tonnes at the end of March, which underscores a considerably reduced inventory buffer. Global primary aluminium output experienced a year-on-year decline of 1.5%, totalling 5.98 million tonnes in June.

In contrast, production in the Gulf region saw a significant drop of 33%, falling to 332,000 tonnes from 507,000 tonnes in the same month of the previous year. In July, exports outside China experienced a year-on-year decrease of 6.7%, whereas Japanese aluminium inventories saw a month-on-month reduction of 7.8%, totalling 220,300 tonnes. In July, China exported 643,000 tonnes of aluminium and semi-finished products, reflecting an 18.6% increase compared to the same month last year, although this figure represents a 9.6% decline from the previous month. For the period from January to July, exports rose by 16.7%, totalling 4.04 million tonnes.

Rising exports from China and Indonesia are anticipated to partially mitigate supply losses from the Gulf. Technically, the market continues to experience long liquidation, as evidenced by a decline in open interest of 8.81% to 3,756 contracts, coinciding with a Rs 6.10 decrease in prices. Aluminium is encountering support around Rs 344.80, and a decline beneath this threshold may reveal Rs 342.80. On the upside, resistance is positioned at Rs 350.10, and a sustained movement above this threshold could initiate a recovery toward Rs 353.40.