Aluminium prices concluded at Rs 353.15, reflecting a 0.28% increase, bolstered by constrained physical availability and diminishing inventories on the Shanghai Futures Exchange. However, the supply outlook may enhance as numerous smelters recommence curtailed capacity and embark on expansion initiatives. The US-Iran conflict has significantly impacted aluminium supplies originating from the Gulf region, evidenced by a 44% year-on-year decline in GCC production in July. Concurrently, LME inventories are hovering close to a 36-year low. SHFE aluminium inventories decreased by 7.7% compared to the previous Friday, underscoring limited supply in the physical market.

China’s increasing export volumes may alleviate some of the shortages experienced in the Gulf region, as unwrought aluminium and aluminium product exports hit 626,000 tonnes in August, with exports for the first eight months of the year rising 16.7% year-on-year to 4.67 million tonnes. Aluminium Bahrain was functioning at an annualised production rate of 1.3 million tonnes, approximately 19% lower than its pre-war capacity, due to the shutdown of production lines following the onset of the conflict and the imposition of restrictions around the Strait of Hormuz. Japanese aluminium inventories at three major ports rose by 22.7% month-on-month, reaching 246,600 tonnes at the end of August.

Alcoa has adjusted its 2026 alumina production guidance downward by 200,000-300,000 tonnes, now estimating a total of 9.5-9.6 million tonnes, attributed to operational disruptions in Western Australia. In July, global primary aluminium production experienced a year-on-year decrease of 1.7%, totalling 6.16 million tonnes. In August, China’s aluminium production achieved a historic high of 3.98 million tonnes, reflecting a year-on-year increase of 4.7%, bolstered by robust smelter margins. From January to August, Chinese output increased by 3.9% to reach 31.12 million tonnes, exceeding the nation’s annual capacity ceiling of 45 million tonnes on an annualised basis.

Technically, aluminium is experiencing short covering, as evidenced by a 3.06% decline in open interest to 3,163 contracts, while prices increased by Rs 1, suggesting position unwinding in conjunction with the price rise. Support is identified at Rs 350.1, with a potential decline below this level testing Rs 346.9. Conversely, resistance is established at Rs 356.1; a consistent movement above this threshold may drive prices toward Rs 358.9.