Current market conditions are broadly expected to continue into the second half with the Alunorte refinery in Brazil still running below full capacity.
The aluminum market has been thrust into a period of uncertainty that has become a feature of the trade in recent months because of tariffs and sanctions, a situation that seems unlikely to change.
The lack of clarity began in April, when the US announced sanctions against several Russian individuals and companies, including aluminum producer UC Rusal.
These sanctions created a lot of uncertainty in the market, which in turn led to a price spike in April and high volatility. But, since April, metal and alumina flows have resumed to a great extent, and prices have moderated.
However, there is still uncertainty on how the sanctions may be resolved. The market uncertainty continued in June, when the US implemented Section 232 tariffs against aluminum imports from Canada, Mexico, and the EU, adding a 10% tax on aluminum from those areas.
A round of retaliatory tariffs imposed by the affected regions has followed. China's aluminum output is expected to be curtailed over winter as part of its crackdown on pollution.
In addition, Rusal expects to halt some of its production as soon as next month if sanctions against it are not lifted. Adding to tightness, a strike at Alcoa's operations in Western Australia continues after an Aug. 8 walkout.
Current market conditions are broadly expected to continue into the second half with the Alunorte refinery in Brazil still running below full capacity.
MCX Aluminum Technical Analysis:
From the above daily chart, we can see prices were moving in a downtrend since June and made a low of around 138 in the month of July and recently prices after consolidating for a month has broken of the channel (T1 and T2) and are trading with a positive bias.
Prices are taking support from the upward sloping trend line (T3) and prices are respecting the support of 20 day SMA (Orange Line) which is a positive sign for the prices to trade higher.
Supports for near-term are between 142 and 140 zones and the recent swing low of 138 is the crucial support.
From the above structure, we could conclude that prices could trade firm in near-term and could retrace the down move from June and could touch the 50% retracement, which is at 148.50 and 61.8% retracement, which is at 151.
RSI is also trading above 50, which indicates a positive outlook for prices in near term.
Disclaimer: The author is AVP Commodity Research, SSJ Finance & Securities Pvt Ltd. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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