Aluminium concluded the trading session with a 0.53% increase, reaching Rs 349.45. This rise was underpinned by a reduction in physical availability and apprehensions regarding supply, as evidenced by the cash-to-three-month spread transitioning into slight backwardation, indicating stronger immediate demand and limited supplies. Aluminium inventories at the Shanghai Futures Exchange experienced a decline of 6.8% compared to the previous Friday. Concurrently, stocks at three major Japanese ports decreased by 8.8% month-on-month, totalling 201,000 tonnes at the end of July. Supportive sentiment also stemmed from anticipations of seasonal enhancements in Chinese demand and fiscal initiatives designed to bolster economic growth.

However, the potential for significant gains remained constrained as EGA and Alba upheld optimistic outlooks regarding the resumption of smelter operations and the gradual increase in production levels. China’s manufacturing PMI rose to 49.8 in August, up from 49.2 in July, surpassing expectations of 49.6. However, it still remains below the critical 50 mark, signifying ongoing contraction. In July, Chinese aluminium production experienced a year-on-year increase of 3.8%, reaching 3.9 million tonnes. Concurrently, exports of unwrought aluminium and semis surged by 18.6% year-on-year to 643,000 tonnes, resulting in total exports from January to July amounting to 4.04 million tonnes, which reflects a 16.7% rise.

Global primary aluminium output 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% reduction in production from the Gulf, which fell to 293,000 tonnes. The daily output in the Gulf has decreased to 9,800 tonnes, down from a pre-war baseline of 17,800 tonnes, due to disruptions in the Middle East that have impacted smelter operations and export logistics. Norsk Hydro’s Alunorte plant has curtailed alumina production to 50% of its capacity as a result of limitations in natural gas supply. Concurrently, Alcoa has revised its 2026 alumina guidance downward by 200,000 to 300,000 tonnes.

EGA’s Al Taweelah smelter was operating at 18% capacity but is anticipated to return to previous output levels by early 2027. From a technical perspective, the market is experiencing short covering, as evidenced by a 1.28% decline in open interest to 4,249, alongside a price increase of Rs 1.85. Aluminium remains positioned above the support level of Rs 347.4, and continued purchasing activity may drive prices toward the resistance threshold at Rs 350.8. A decisive breakout above Rs 350.8 may extend gains toward Rs 352.2, while a break below Rs 347.4 could weaken prices toward Rs 345.4.