China experienced a decline in aluminium prices amid strong supply
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The price of Aluminium saw an increase of 1.41 percent on July7, 2023, reaching 198.3 due to the slow resumption of production in regions such as Sichuan and Guizhou. This delay can be attributed to heavy rainfall in Yunnan, which led to a rise in reservoir water levels. This affected production and is expected to resume only by mid to late July. This delay has caused a decline in domestic inventory, resulting in an increase in aluminium prices.
Low inventories and short-term macro benefits combine to enhance aluminium prices in a specific way. S&P Global has reported that China's post-COVID recovery is facing some setbacks, reducing its 2023 GDP growth forecast from 5.5 percent to 5.2 percent. While the recovery is still expected to progress, it is predicted that investment and industry may need to catch up with the pace.
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S&P is the first major international credit agency to lower its economic forecasts for China this year, and other major banks, such as Goldman Sachs, have also revised their estimates downwards in recent weeks. Goldman Sachs, for example, has reduced its forecast from 6 percent to 5.4 percent, citing weak confidence and concerns over the property market as contributing factors.
From a technical standpoint, the market is experiencing short covering, with open interest plummeting by -10.81 percent and settling at 3513 while prices have risen by 2.75 rupees. Presently, Aluminium is receiving support at 197.1, and if it falls below this point, it could potentially test the 195.8 level. On the other hand, resistance is expected to be seen at 199.3, and if prices manage to move above this level, it could lead to a test of 200.2.
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According to Procurement Resource, the aluminium price has decreased due to an increase in production and supply. However, production has been stopped temporarily due to heavy rainfall and is expected to resume in mid to late July. The economic recovery of China is facing uncertainties and challenges that could potentially impact the demand for aluminium.
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