LME Stock Surge in June Leads to a Drop in Aluminium Prices

The aluminium market experienced a noteworthy decline of -0.92%, with prices settling at 203.55, primarily influenced by a significant upswing in aluminium stocks within LME-registered warehouses. This surge marked the highest level since June and was propelled by the arrival of 14,525 tons, as revealed by the latest data from the London Metal Exchange (LME). Concurrently, the social inventory of domestic aluminium billet recorded a substantial increase, reaching 82,000 metric tons on January 4.

The surge in domestic aluminium billet inventory represented a weekly escalation of 17,900 metric tons and a year-on-year growth of 2,300 metric tons. This surge, occurring post-holidays, indicated a rapid accumulation in the wake of the festive season. Amid these market dynamics, broader economic factors played a significant role. The U.S. non-farm payrolls for December surpassed expectations, accompanied by a lower-than-anticipated unemployment rate. Although there was a slight dip in the ISM service industry index, it remained within the expansion range. This underscored the resilience of the job market, subsequently mitigating expectations for immediate interest rate cuts.

On a fundamental level, the domestic aluminium supply side has entered a phase of stable operation, with no significant short-term alterations anticipated. As the traditional off-season unfolds, the industry is poised for an anticipated surge in aluminium ingot production. The potential stabilization of alumina supply disruptions caused by the oil deposit incident in Guinea and the conclusion of the domestic heating season might provide temporary stability to the market. This shift has prompted a reversion to fundamental factors in the trading logic of the Shanghai Futures Exchange (SHFE) aluminium.

From a technical standpoint, the market is currently witnessing long liquidation, with open interest experiencing a 1.67% decline, thereby settling at 4186. The support level for aluminium is identified at 202.9, with a potential test of 202.1. Conversely, resistance is anticipated at 204.8, and surpassing this level could lead to a testing of 205.9.

The aluminium market is navigating a complex landscape shaped by factors ranging from increased LME stocks and domestic inventory surges to broader economic indicators and technical market dynamics. The interplay of these elements contributes to the current outlook, thereby necessitating a nuanced consideration of potential future movements in the prices of aluminium. Investors and industry observers will closely monitor these factors to gauge the trajectory of the aluminium market in the upcoming weeks and months, as it continues to respond to a dynamic and multifaceted environment.