In the short term, aluminium prices will remain under selling pressure, with the expected fall in alumina prices, as supply tightness eases
Narnolia Financial Advisors
Most of the base metals are trading near 52-week lows. Copper and aluminium have seen a sharp fall over the last two months. Lead and zinc have taken some support due to lower inventories on both the London Metal Exchange and Shanghai Futures Exchange, but are still trading close to their yearly lows. Nickel prices are showing some strength, but in the absence of follow-through buying went back into bearish territory.
Fall in base metal prices got accentuated after Democrats won control of House of Representatives in the US.
Strengthening dollar and possibility of an interest rate hike during the next Federal Open Markets Committee (FOMC) meeting in December is a near term negative for metal prices. Also, lack of progress in trade talks between the United States and China is hurting sentiment highly negatively for base metal prices.
Worker’s agreement to end the strike at Alcoa’s alumina plant in Australia has reduced supply tightness in the alumina market and also triggered a fall in global aluminium premium.
In recent months, export from China has increased substantially by over 30 percent year-on-year as automobile sales, which is the major driver of domestic Chinese demand, has fallen 11.7 percent.
Going forward, sentiment would remain depressed as China’s restrictions on aluminium production in 2018-19 winters will not be as tough as last year as major states are maintaining their emission standards.
The only positive for aluminium prices is lower LME inventories. Also, forthcoming US sanction on Rusal on December 12 can alter the demand-supply equilibrium.
In the short term, aluminium prices will remain under selling pressure, with the expected fall in alumina prices, as supply tightness eases. MCX Aluminium prices can trade lower towards Rs 135-138 per kg from the current Rs 145 per kg.
The author is Commodity Analyst at Narnolia Financial AdvisorsDisclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.