Aluminium settled down -1.16% at 119.60 as trader book profit on the news that rising Chinese output is likely to act as a brake on aluminium's 15 percent rally since May, even as the global outlook for the industrial metal improves. It's no secret that much of Chinese aluminium smelting capacity operates at a loss and is reliant on subsidies from local and regional governments to survive. But the price gain in the second quarter resulted in capacity that was either idled, or about to be shut, remaining in operation, according to a July 17 report from Beijing-based consultants AZ China. Chinese aluminium output is also rising, with National Bureau of Statistics data showing June production of 1.95 million tonnes, up 4.8 percent from May, and year-to-date output of 11.54 million tonnes, up 7.4 percent some the same period in 2013. While official statistics may not capture all of China's aluminium output, they do reveal a rising trend, which shows that even the parlous state of profitability at smelters isn't resulting in production cutbacks. Aluminum reached a one-year high in London after Alcoa Inc. said a shortage of the metal will be larger than previously forecast. The aluminum market’s supply-demand deficit will come to 930,000 metric tons this year, more than April’s 730,000-ton estimate, Alcoa, the biggest U.S. producer, said yesterday. Inventories monitored by the London Metal Exchange are at the lowest since September 2012, a bourse data showed. The global aluminum market has moved into deficit of 579,000 tons this year, with the gap increasing to 619,000 tons next year. Technically market is under long liquidation and getting support at 118.7 and below same could see a test of 117.7 level, And resistance is now likely to be seen at 121.3, a move above could see prices testing 122.9.

Trading Ideas:

Aluminium trading range for the day is 117.7-122.9.

Aluminium dropped on profit booking on the news that rising Chinese output is likely to act as a brake on aluminium's rally

The global aluminum market has moved into deficit of 579,000 tons this year, with the gap increasing to 619,000 tons next year.

Inventories monitored by the London Metal Exchange are at the lowest since September 2012, a bourse data showed.