China plans to release about 900,000 tonnes of primary aluminium from state reserves to ease price rally

According to a report last week, China is preparing to release 800,000-900,000 tonnes of primary aluminium from its state reserves in early July to ease the incessant hike of the metal price. The news came after consultancy CRU said in a note to clients.

Shanghai primary aluminium price is presently up by almost 20 per cent in 2021 amid a strong rebound in demand from the COVID-19 outbreak. It touched a decade high of RMB 20,435 per tonne on May 10.

The amount of metal that China is considering to release is higher than 500,000 tonnes that once China planned to release some point this year. However, 900,000 tonnes is only one-quarter of China’s recent monthly production levels.

“The stock releases could […] offset some of the shortages caused by imposed curtailments in Yunnan and Inner Mongolia. CRU estimates (state) aluminium stocks are 777,000 tonnes, so this is a surprisingly high number to us,” read the CRU report dated June 9, 2021.

The National Food and Strategic Reserves Administration is seeking to sell off the aluminium in several batches from July, added CRU. However, the administration did not immediately respond to the comment request.

China produced 3.32 million tonnes of primary aluminium in May. Drought in the smelting hub of Yunnan reduced hydropower supply, meaning aluminium producers had to cut electricity consumption and metal output.