China to release copper, aluminum and zinc reserves to stabilize commodity prices
BEIJING / HANOI: China said on Wednesday it would release national reserves of some base metals in the near term, as the world’s largest metal consumer tries to stabilize the price of key commodities.
The advice came as Beijing struggles to cool its scorching metals sector, which has seen prices rise this year, fueled by a post-pandemic economic recovery, abundant global liquidity and pockets of speculative buying.
Chinese factory exit inflation hit its highest level for more than 12 years in May, squeezing corporate profit margins and highlighting global pricing pressures as policymakers attempt to revitalize the economy. growth affected by COVID.
The National Food and Strategic Reserve Administration said in a statement posted on its website that it will release reserves including copper, aluminum and zinc in batches for non-ferrous metal processing and manufacturing companies. through public tenders.
The two copper contracts on the Shanghai Futures Exchange and the London Metal Exchange hit record highs in May, having risen more than 60% since March of last year when the pandemic hit global markets.
Aluminum ShFE reached its highest level since 2010 in May, while zinc reached its highest level since 2007 in the same month. Chart: China to release public stocks of copper, aluminum and zinc to stabilize prices of key commodities, https://fingfx.thomsonreuters.com/gfx/ce/yxmvjawnopr/ShanghaiBaseMetalsJune2021.png
Chinese regulators recently stepped up efforts to cool commodity prices, saying they will closely monitor market movements.
Metals traders had expected sales from national reserves since mid-March, with an emphasis on aluminum. Chart: Factory Outlet Prices in China Rise at the Fastest Rate in 12 Years as Commodity Costs Rise, https://fingfx.thomsonreuters.com/gfx/ce/rlgvddxyovo/ChinaFactoryGatePrices.png
“The Chinese authorities are trying to help support the margins of its manufacturing industry as they struggle to pass these costs on to end users,” said commodity broker Anna Stablum at Marex Spectron.
The administration’s statement did not mention details of the auction process and which manufacturers will be allowed to bid.
While some metal prices have fallen since mid-May amid stepped-up signals from Beijing on price controls, analysts and traders believe they won’t fall much more as markets have already factored in some sales. from reserves.
Additionally, demand in most economies continues to recover from pandemic recessions, albeit at an uneven pace.
“However, we still have no information on the size of these sales and it will certainly continue to weigh on these markets,” added Stablum.
(US $ 1 = 6.4035 yuan)
(Reporting by Min Zhang and Dominique Patton in Beijing, Mai Nguyen in Hanoi; Editing by Muralikumar Anantharaman and Kim Coghill)