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Aluminium to trade negative

Aluminium prices drifted lower from the recent high of $2276.50 per mt and currently trading near $2232 per mt on the backdrop of tit-for-tat sanctions between China and the West and new coronavirus lockdown in Germany and France.

Recent sanction has created geopolitical tension and likely to reduce metals demand if there is more acceleration from both ends. The United States, the European Union, Britain, and Canada imposed sanctions on Chinese officials for human rights abuses in Xinjiang and Beijing reciprocate same immediately by putting measures against the European Union.

New coronavirus lockdowns in Europe have also reduced hope for faster economic recovery in the region. Germany and France are extending restrictions to prevent the rapid spread of the deadly coronavirus.

Aluminium prices plunged, hitting a daily decline limit on Monday in SHFE, as traders sold futures contracts following speculation of China’s plans. China is believed to be considering selling about 500,000 metric tons of Aluminium from state reserves to cool the market and meet the emissions objectives. Aluminium production is projected to drop as China is committed to limit energy usage to become a carbon-neutral economy by 2060.

SHFE warehouse inventory report suggests that Aluminium stock has increased by 51,086mt in the last 30 days and now stands at 1,59,225mt as of 24 March 2021. Also, LME Aluminium stock has increased by 6, 08,850mt in the last 30 days and now stands at 19,46,550mt as of 24 March 2021.

However, Aluminium prices are likely to find support from strong global manufacturing PMI numbers.  The Eurozone Mar Markit manufacturing PMI unexpectedly rose +4.5 to 62.4, stronger than expectations of a decline to 57.6 also, the Japan Mar Jibun Bank manufacturing PMI rose +0.6 to 52.0, the fastest pace of expansion in 2-1/4 years. Albeit the U.S. Mar Markit manufacturing, PMI rose +0.4 to 59.0, against expectations of 59.5

Aluminium price is facing stiff resistance near the recent high of 2276.50 and likely to trade below this level on the backdrop of new covid lockdown which will limit metals demand along with sanction on China is negative for metals prices. It may find immediate support around 50 days EMA at $2128 and 100 days EMA at $2043

Natural Gas to continue bearish trend if prices break below the key support level of $2.422

Natural Gas prices are trading in the range of $2.422 -$2.592 from the last eight trading session on the backdrop of mixed signals. Strong export demand, low production and demand from electricity production is supporting the prices but weakening heating demand due to normal temperature forecast is limiting the gains.

Weather forecasting agency Maxar on Wednesday is projecting below-normal temperatures for the Central, South, and eastern U.S. from March 29-April 2.   Also, as per Bloomberg data, US natural gas demand on Wednesday fell by 17% y/y to 63.6 bcf.

However, Natural Gas prices found support from export demand, demand from electricity production and lower US domestic production. As per Bloomberg data, Gas flows to U.S LNG export terminals on Wednesday rose +23% y/y to 11.4 bcf.  US gas production on Wednesday fell -2.6% y/y to 90.718 bcf/d

Natural Gas prices are likely to get fresh direction from the weekly inventory report which will be released later today. The market expects inventories to fall by 21 bcf, a smaller draw than the 5-year average for this time of year by 51 bcf. Last Thursday's weekly EIA report indicates that inventories in the week of March 12 fell by 11 bcf to a 1-3/4 year low of 1,782 bcf, against expectations of a drop of 18 bcf. At present Natural Gas Inventories are 5.0% below the 5-year average.

Natural Gas prices are trading in the $2.422 -$2.592 may continue bearish trend if prices break below the key support level of $2.422, it may find next support level around $2.364 and $2.306. Natural Gas prices are likely to face stiff resistance near 20 days EMA at $2.630 and 50 days EMA at 2.702

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