Aluminium settled 0.25% higher at Rs 347.60, buoyed by declining inventories and anticipations of additional policy support from China. However, the gains were constrained by rising oil prices, renewed inflation concerns, and expectations of increased interest rates. Aluminium stocks at three major Japanese ports decreased by 8.8% month-on-month, reaching 201,000 tonnes at the end of July. Concurrently, SHFE-monitored inventories saw a 3% decline from the previous week, suggesting a tightening in availability. China’s official manufacturing PMI rose to 49.8 in August, up from 49.2 in July, surpassing the anticipated figure of 49.6. However, it still remains below the critical 50 mark, indicating ongoing contraction in manufacturing activity.

China’s Q2 GDP growth decelerated to 4.3%, heightening anticipations for further fiscal measures to bolster economic expansion. In July, China’s aluminium production experienced a year-on-year increase of 3.8%, reaching 3.9 million tonnes. Concurrently, exports of unwrought aluminium and semi-finished products surged by 18.6% year-on-year to 643,000 tonnes. This brought the total exports for the January-July period to 4.04 million tonnes, reflecting a rise of 16.7%. Global primary aluminium production experienced a year-on-year decline of 1.7%, totalling 6.16 million tonnes in July. This decrease was primarily attributed to a significant 44% drop in production from the Gulf, which fell to 293,000 tonnes, largely influenced by disruptions in the Middle East.

EGA’s Al Taweelah smelter was functioning at 18% capacity and is anticipated to rebound to prior levels by early 2027, as both Alba and EGA progressively resume production. Norsk Hydro’s Alunorte has curtailed alumina production to 50% of its capacity in response to diminished natural gas availability. Concurrently, Alcoa has revised its 2026 alumina production guidance downward by 200,000–300,000 tonnes, now projecting a total of 9.5–9.6 million tonnes. Japanese buyers also received lower quarterly premium offers, reflecting expectations of improving supply.

Aluminium is currently experiencing short covering, evidenced by a 1.22% decrease in open interest to 4,301 contracts, alongside a price increase of Rs 0.85. This suggests a process of position unwinding accompanied by a slight upward price movement. Immediate support is positioned at Rs 345.00, and a breach beneath this threshold may lead to a decline in prices toward Rs 342.30. On the upside, resistance is observed at Rs 349.20, and a sustained movement above this threshold could propel prices toward Rs 350.70.