Aluminium market under long liquidation, open interest drops 11.43%

Aluminium settled down -1.74% at 110.05 as pressure seen after the report that Chinese buyers of primary aluminium are reluctant to book imports for the second quarter as they hold limited cash and as falling premiums prompt them to postpone purchases. While China is the world's top producer of aluminium, some end users buy the metal abroad under a rule that allows them to import duty free as long as products made from the cargoes are shipped overseas. Reduced buying will likely pile more pressure on premiums for primary aluminium ingots in Asia.

Premiums, the surcharge paid by buyers on top of the London Metal Exchange cash price to obtain prompt delivery, have fallen in the global market in the first quarter from record highs, with some analysts predicting further drops. While Ms. Yellen indicated that its benchmark Federal Funds Rate could be increased later this year, she emphasized that it will not occur until after the Federal Open Market Committee’s next meeting in April, at the earliest. Yellen added that the timing of the decision will be “data dependent,” and that a rate hike will not necessarily be made in June.

Despite removing references of remaining patient from the Fed’s monetary policy stance, Yellen struck a dovish tone at times with forecasts for weaker inflation and GDP growth, as well as lower long-term interest rate increases. Technically market is under long liquidation as market has witnessed drop in open interest by -11.43% to settled at 2898 while prices down -1.95 rupee, now Aluminium is getting support at 109.4 and below same could see a test of 108.6 level, and resistance is now likely to be seen at 111.4, a move above could see prices testing 112.6.

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