Aluminium prices on the London Metal Exchange (LME) have marked their longest winning streak in over a year, climbing for the seventh consecutive session. This sustained rally has pushed the benchmark metal to its highest level since March, underlining the current strength in the industrial metals market.

Price Movements

The light metal reached a peak of $2,705.00 per ton during the trading session, before settling at $2,694.50 per ton. This represents a significant uptick from recent levels and reflects growing investor confidence in industrial metals.

Factors Driving the Rally

Several factors are contributing to the bullish sentiment in the aluminium market:

1. Federal Reserve Policy Anticipation: Investors are keenly awaiting the Federal Reserve's policy decision. The market appears to be pricing in expectations of potential monetary easing.

2. Dollar Weakness: Growing anticipation of a more dovish Fed stance is putting pressure on the US dollar. A weaker dollar typically supports higher commodity prices, as it makes dollar-denominated metals more attractive to holders of other currencies.

3. Supply Concerns: A surge in inventory withdrawal requests has raised concerns about aluminium supply, further supporting prices.

4. Broader Market Sentiment: The rally in aluminium prices is occurring alongside rising Asian equities, indicating a generally positive mood in financial markets.

Other Industrial Metals

The positive sentiment is not limited to aluminium. Other base metals on the LME are also experiencing gains:

• Copper
• Zinc
• Nickel

These metals have all posted increases, suggesting a broad-based rally in the industrial metals complex.

Market Outlook

While the current trend is decidedly positive, market participants will be closely watching the Federal Reserve's announcement for cues on future monetary policy. Any shift in interest rate expectations could have significant implications for the US dollar and, consequently, for metal prices.

The sustained rally in aluminium prices, coupled with supply concerns and broader market optimism, paints a picture of a metal market that is currently finding strong support. However, investors and industry players should remain vigilant to potential shifts in macroeconomic conditions and policy decisions that could impact this trend.

Aluminium prices experienced a downturn on the Multi Commodity Exchange (MCX) of India, mirroring similar declines in international markets. The price drop comes in the wake of the Trump administration's decision to broaden its import tariffs on aluminium products.

MCX and Global Market Trends

On the MCX, aluminium prices fell by 0.60% to Rs 250.55 per kg. This decline aligns with the downward movement observed in both London and Shanghai markets. The London Metal Exchange (LME) saw three-month aluminium futures trading at $2,588.50, marking a 0.71% decrease. Similarly, the Shanghai Futures Exchange (SHFE) reported aluminium contracts at CNY 20,565 per metric ton, down by 0.22%.

Expanded U.S. Tariffs

The primary catalyst for this market movement appears to be the Trump administration's expansion of its 50% import levy. The updated tariff list, which took effect on August 18, now includes a broader range of aluminium derivative products. This move has sent ripples through the global aluminium market, affecting prices across various exchanges.

Market Support Factors

Despite the pressure from increased tariffs, the aluminium market finds support from several factors:

1. Chinese Production Cap: Annual aluminium production in China is capped at 45 million tons, which helps to control supply.
2. Increased European Demand: Higher demand in the European Union, driven by increased defense investments, provides some market stability.
3. Supply Constraints: European aluminium supply remains constrained due to ongoing sanctions on Russia, a major producer.

Technical Analysis and Expert Recommendations

Technical analysis suggests that aluminium is currently trading within a range of Rs 250-256. The market faces resistance at Rs 256, with support levels identified at Rs 248-249.

Market experts are recommending a buy-on-dips strategy for traders:

This strategy suggests that while the market is currently experiencing downward pressure, there's potential for an upswing if certain price levels are breached.

Conclusion

The aluminium market is currently navigating through a complex landscape of international trade policies and regional supply-demand dynamics. While the expanded U.S. tariffs have put downward pressure on prices, underlying factors such as production caps and regional demand continue to provide support. Traders and investors in the aluminium market should closely monitor these factors and the identified price levels for potential trading opportunities.