China will release 96,000 metric tons of aluminum ingots from state reserves next month through public auctions, said the State Bureau of Material Reserve. Aluminum prices in London declined.
The sales will be held on Nov. 1 and Nov. 2, the bureau said in a statement on its website. The agency is also known as the State Reserve Bureau and manages government stockpiles.
Aluminum sales by China, the largest producer and consumer, may weigh on prices, which have gained more than 5 percent this year. The government has sold paper pulp, magnesium, sugar, cotton and corn this year in an effort to ease supply shortages and curb price gains.
“Controlling inflation and inflation expectations has become the government’s top priority recently,” Wan Ling, an analyst at CRU International Ltd., said by phone from Beijing. “This is a pre-emptive measure to prevent an increase of aluminum prices, following the news of production cuts by some smelters due to energy conservation.”
China’s consumer prices rose 3.6 percent in September, the fastest in 23 months, the National Bureau of Statistics said yesterday. The People’s Bank of China increased deposit and lending rates from Oct. 20 for the first time since the global crisis, affirming policy makers’ confidence in the recovery and concern at price pressures.
Output Cuts
China’s Henan province, the country’s largest aluminum producing region, is going to cut output by nearly 20 percent in the fourth quarter in an effort to meet Beijing’s energy-saving targets. Smelters in Guangxi region, as well as Qinghai and Guizhou provinces, have also started to shut down aluminum production capacity.
The power restriction “has been greater and is likely to be more long-lasting on aluminum than on steel,” Macquarie Group Ltd. said in a report issued Oct. 16. Macquarie has a “positive view” on aluminum prices for the fourth quarter, according to the report.
China bought 235,000 tons of copper, 590,000 tons of aluminum, 159,000 tons of zinc, 30 tons of indium and 5,000 tons of titanium for reserves, Caijing magazine reported in June last year, citing Yu Dongming, a metals industry official of the National Development and Reform Commission, the country’s economic planner.
Chinese state buying of raw materials for stockpiling in the first half of last year helped lift commodity prices, with copper and zinc doubling in 2009.
‘Good Timing’
Aluminum for three-month delivery on the London Metal Exchange fell as much as 0.4 percent to $2,340 a ton after the announcement and traded at $2,353.50 a ton at 6:23 p.m. in Shanghai. Prices have gained 26 percent since the end of 2008, touching a 6-month high of $2,459 a ton on Oct. 14.
“For the regulator, it’s a good time to sell,” Peng Lijuan, an analyst at Cofco Futures Co., said by phone from Beijing. “When they bought the metal, it was very cheap, now the price is relatively high, and if prices remain high, it’s possible that they might sell more.”
China sold 216,803 tons of sugar from reserves in auctions today, according to industry portal sugarinfo.net. The government sold 2,739.7 tons of magnesium ingots this week, pulling prices off a 21-month high.
The volume of the aluminum sale “isn’t small so it should be enough to meet any shortfall due to the production cut this year,” CRU’s Wan said.
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