Aluminium Dropped As LME Stocks Jumped More Than 13% To 2-1/2 Month Highs

prices experienced a decline of -1.38%, settling at 199.95, driven by an increase in aluminium stocks in London Metal Exchange (LME) warehouses. The LME reported a net inflow of 59,850 metric tons of aluminium, pushing total stocks to 504,475 tons, marking a 13% increase and reaching 2.5-month highs. This surge in stocks suggests surpluses of the metal, commonly used in transport, packaging, and construction. The rise in global primary aluminium output by 2.7% year-on-year to 5.893 million tonnes in November, as reported by the International Aluminium Institute (IAI), added to the bearish sentiment. 

Demand slowdowns in top consumer China and Europe, coupled with increased Chinese production in the past month due to added capacity, contributed to the market’s apprehension. On the supply side, aluminium stocks at major Japanese ports decreased by 3.3% to 330,000 metric tons at the end of November, compared to 341,300 metric tons the previous month. Meanwhile, the People’s Bank of China (PBoC) kept lending rates steady in December, maintaining the one-year loan prime rate (LPR) at a record low of 3.45% for the fourth consecutive month. 

Technically, the market is undergoing long liquidation, with a significant drop of -53.63% in open interest, settling at 735. Aluminium is finding support at 198.9, with a potential test of 197.8, while resistance is expected at 201.8, and a move above could lead to testing 203.6.