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China’s National Food and Strategic Reserves Administration said Sept. 27 it will release metal stocks from state reserves as part of plans to stabilize soaring commodity prices and ease cost pressures faced by downstream processors.
China will release 70,000 mt of aluminum, 30,000 mt of copper and 50,000 mt of zinc reserves in what would be the fourth batch of a series first started in July.
It will hold an open-bidding process on Oct. 9, when only downstream processors would be eligible for bidding.
China’s domestic markets are facing a long-drawn period of skyrocketing commodity prices, mostly caused by a renewed pent-up demand that started earlier in 2021.
In some cases, the rushing back of demand also meant factories involved in production of metals like aluminum used more hydropower, resulting in overloaded energy grids.
Meanwhile, a renewed push from the administration to curb power usage amid China’s broader carbon goals forced smelters to cut production in recent weeks, propping up prices.
The most-active aluminum contract — for November delivery — on the Shanghai Futures Exchange hit a more than 15-year high Sept. 13 before falling back to Yuan 22,725/mt ($3,516/mt) on Sept. 27. The contract is up 47% up since the start of the year.
Metal stocks
Since first announced in July, China has released a total of 110,000 mt of copper, 280,000 mt of aluminum and 180,000 mt of zinc state reserves, targeting medium and small-sized downstream processors.
China releasing metal stocks were not able to halt the rise of domestic primary aluminum prices over the past two months, as output curbs widened in the midst of worsening power shortages and growing push to meet energy targets, market sources said.
Domestic aluminum prices were expected to remain volatile at elevated levels in the near term, aided by output restrictions that continue to expand to other regions, sources said.
As downstream processors also face stricter power curbs, this may result in build-up of domestic stocks, as demand from the processors is yet to pick up as is expected in the traditional peak season, some sources said.