Indian aluminium futures have reached an unprecedented high of ₹275.00 per kg, marking a significant 14.00% gain since January. This surge is attributed to a combination of factors including import restrictions, robust domestic demand, and tight supply conditions in the global market.

Key Factors Driving Aluminium Prices

Global Market Pressures

The global aluminium market continues to face significant pressures from various sources:

1. Russia-Ukraine Conflict: The ongoing geopolitical tension is disrupting supply chains and creating uncertainty in the market.

2. US Tariff Increase: The United States has raised tariffs to 50.00%, potentially reshaping global trade flows and pricing structures.

3. Chinese Production Limits: China, a major aluminium producer, is reportedly nearing its production capacity limits, further constraining global supply.

These factors collectively contribute to supply constraints and price volatility in the worldwide aluminium market.

Implications for Stakeholders

The record-high prices and supply disruptions may have far-reaching implications for various industries that rely on aluminium, including construction, automotive, and packaging sectors. Manufacturers and consumers alike may need to adapt to the changing market dynamics and potentially higher costs of aluminium-based products.

As the situation continues to evolve, market participants will likely closely monitor global events and policy decisions that could impact aluminium supply and demand balances in the coming months.

Aluminium prices on the Multi Commodity Exchange (MCX) are approaching six-month highs, despite a slight dip in Wednesday's trading session. The September contracts for aluminium traded at Rs 259.50 per kg, down 0.90% on the day, but the overall trend remains bullish due to growing supply concerns.

Supply Constraints Fuel Price Rally

The recent surge in aluminium prices can be attributed to several factors:

1. Declining LME Stocks: London Metal Exchange (LME) primary aluminium stocks have seen a sharp decline, falling by nearly 100,000 tonnes to 375,000 in just the first third of the month. This significant reduction is driven by increased speculative positions and rising physical demand.

2. Chinese Production Limits: China, the world's largest aluminium producer, faces potential supply growth constraints due to the country's annual production limit of 45 million tons. This cap could further tighten global supply.

Technical Analysis and Trading Strategy

Aluminium has shown strong recovery from its August lows of Rs 253.75, currently trading above both its 50-day and 200-day moving averages. This technical positioning suggests a continued bullish trend in the near term.

For traders looking to capitalize on the current market conditions, analysts recommend the following strategy:

• Accumulation Zone: Consider buying on dips towards Rs 256-258 per kg
• Stop Loss: Place a stop loss below Rs 252 per kg
• Target Levels: Aim for upside targets of Rs 266 and Rs 268 per kg

This strategy offers a potential return of up to 4.00% based on current price levels.

Market Outlook

While the slight dip in Wednesday's trading suggests some profit-taking or short-term consolidation, the underlying fundamentals of tight supply and increasing demand continue to support a bullish outlook for aluminium prices.

Investors and traders should closely monitor global supply dynamics, particularly any changes in Chinese production or further drawdowns in LME stocks, as these factors are likely to play a crucial role in determining the metal's price trajectory in the coming weeks.

As always, market participants are advised to conduct their own research and consider their risk tolerance before making investment decisions in the volatile commodities market.