Business Line reported that the demand from China for aluminium combined with an economic recovery in the developed markets, could increase the overall demand and help the metal price to recover.

The aluminium sector in India is in a slowdown phase.

Data from the World Bureau of Metal Statistics said that aluminium consumption in India declined by 22% in 2013 (till October) compared with an increase of 7.2% and 6.4% in 2012 and 2011 respectively.

The metal’s production too declined. It was down by 23% in 2013 compared with an increase of 3.3% in 2012 and 3.1% in 2011.

The aluminium market experienced surplus supply of 5.86 thousand tonnes in 2013.

Global situation

Over supply could continue to keep the price lower for a while. However, if the economy recovers and demand increases, aluminium price can see a recovery going forward.

Data from the International Aluminium Institute shows that the global production in 2013 was down by 4.9% (January to November).

However, production in China, the world’s leading producer of aluminium, was up slightly by 1.3% for the same period. China accounts for over 40% of global aluminium production and consumes around 45% of the total production.

The demand from China for aluminium is expected to grow by 10% in 2014. This, combined with an economic recovery in the developed markets, could increase the overall demand and help the aluminium price to recover.

Long-term view:

The MCX aluminium (INR 109.2) contract has been trading between INR 62 and INR 151 ever since it began its trading. The contract is likely to trade in this range only in the long-term. Important intermediate support is at INR 90. A break below this support can take the contract to the lower end of the range.

On the upside, INR 125 is an important resistance. The contract has to breach this level to rise to INR 151, the upper end of the range.

Medium-term view:

The medium-term range for the contract is between INR 96 and INR 125. Within this range, the trend is down. Resistance is at INR 118. Below this, the contract can move down to INR 96, the lower end of the range. Intermediate support is at INR 100.

Short-term view:

The short-term trend is also down. The contract has come down sharply after rising to a high of INR 130 in August.

The immediate resistance is at INR 112 and short-term resistance is at INR 115. Only a break above INR 115 can reverse the trend. Immediate support is at INR 106. A break below this support can take the contract lower to INR 102 in the short-term.