Commodity reported that China is continuing its games with base metals as any decision taken by the Communist nation will affect the global market in a big way.
After tightening loans to certain sectors which impacted the copper prices in a big way China has now decided to release 96,000 tonnes of aluminum ingots from state reserves next month through public auctions.
The sales will be held on November 1 and 2. Aluminum sales by China, the largest producer and consumer may weigh on prices which have gained more than 5% 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.
China said that controlling inflation and inflation expectations has become the government’s top priority recently. This is a preemptive 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% in September the fastest in 23 months. The People’s Bank of China increased deposit and lending rates from October 20 for the first time since the global crisis affirming policy makers’ confidence in the recovery and concern at price pressures.
China’s Henan province, the country’s largest aluminum producing region is going to cut output by nearly 20%$ in the Q4 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. China bought 235,000 tons of copper, 590,000 tonnes of aluminum, 159,000 tonnes of zinc, 30 tonnes of indium and 5,000 tonnes of titanium for reserves.
Chinese state buying of raw materials for stockpiling in the H1 of last year helped lift commodity prices with copper and zinc doubling in 2009. Aluminum for 3 month delivery on the London Metal Exchange fell as much as 0.4 percent to USD 2,340 per tonne after the announcement. Prices have gained 26% since the end of 2008, touching 6 month high of USD 2,459 per tonne on October 14. 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.
（Sourced from Commodity Online）
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