Reuters
China to resume stockpiling base metals soon
Edited by : AL CIRCLE
3 min read
China is expected to soon resume stockpiling of some base metals, including copper and aluminium, buying them from domestic smelters hurt by weak demand, industry sources said on Tuesday.
China is the world's top consumer of industrial metals, but its smelters, hit by slowing economic growth, have lobbied the government to revive a state-run scheme to stockpile industrial metals, in hopes the move will prop up prices.
The state-run stockpiling scheme was launched soon after the 2008/09 financial crisis, at the prodding of the country's smelters, and led to an increase in metal imports in 2009.
When the scheme resumes, the State Reserves Bureau could buy around 400,000 tonnes of primary aluminium ingots and 165,000 tonnes of refined copper cathode, industry sources said.
The sources declined to be identified because of the sensitivity of the subject.
Expectations are growing for Beijing's new top rulers to announce stimulus measures following a once-in-a-decade leadership change set to be ushered in by a Communist Party congress beginning on Thursday.
Although China racked up annual GDP growth of 7.4 percent in the third quarter of 2012, this was its slowest pace since the depths of the global financial crisis in the first quarter of 2009.
The stockpiling measure could put a floor under metals prices and benefit copper more than aluminium, analysts said.
"It's just picking up slack in the domestic system. Obviously, the data suggests the economy has stabilised but it's hardly firing on all cylinders," said Leon Westgate, an analyst at Standard Bank based in London.
Bonded stocks have been rising, and the latest data suggest domestic demand may have stabilised at low levels rather than bouncing back strongly, he added.
"(The NDRC) are not going to pay top dollar but they may help provide a floor for prices."
The move to resume stockpiling followed a proposal by the China Nonferrous Metals Industry Association for the state planner to complete the scheme, or even buy more supplies, so as to alleviate conditions for domestic smelters, which were harsher than in the 2008/09 crisis, the first source said.
During the last phase of buying, which expired last year, the State Reserves Bureau bought fewer metals than originally planned, which analysts said left it with scope to launch another round.
At the launch of the inaugural stockpiling in December 2008, the Bureau said it planned to buy 1 million tonnes of aluminium, 400,000 tonnes of copper and a total of 400,000 of lead and zinc from domestic smelters over three years.
However, it only bought 235,000 tonnes of copper, 590,000 tonnes of primary aluminium and 159,000 tonnes of refined zinc by the end of the round.
"I think the buying would happen in November. It should not be later than Dec. 15 because after that time smelters won't be able to put the sales into this year's earnings."
A sales manager at a large aluminium smelter said he expected the State Reserves Bureau to buy around 400,000 tonnes of aluminium from local smelters very soon.
China is the world's top consumer of industrial metals, but its smelters, hit by slowing economic growth, have lobbied the government to revive a state-run scheme to stockpile industrial metals, in hopes the move will prop up prices.
The state-run stockpiling scheme was launched soon after the 2008/09 financial crisis, at the prodding of the country's smelters, and led to an increase in metal imports in 2009.
When the scheme resumes, the State Reserves Bureau could buy around 400,000 tonnes of primary aluminium ingots and 165,000 tonnes of refined copper cathode, industry sources said.
The sources declined to be identified because of the sensitivity of the subject.
Expectations are growing for Beijing's new top rulers to announce stimulus measures following a once-in-a-decade leadership change set to be ushered in by a Communist Party congress beginning on Thursday.
Although China racked up annual GDP growth of 7.4 percent in the third quarter of 2012, this was its slowest pace since the depths of the global financial crisis in the first quarter of 2009.
The stockpiling measure could put a floor under metals prices and benefit copper more than aluminium, analysts said.
"It's just picking up slack in the domestic system. Obviously, the data suggests the economy has stabilised but it's hardly firing on all cylinders," said Leon Westgate, an analyst at Standard Bank based in London.
Bonded stocks have been rising, and the latest data suggest domestic demand may have stabilised at low levels rather than bouncing back strongly, he added.
"(The NDRC) are not going to pay top dollar but they may help provide a floor for prices."
The move to resume stockpiling followed a proposal by the China Nonferrous Metals Industry Association for the state planner to complete the scheme, or even buy more supplies, so as to alleviate conditions for domestic smelters, which were harsher than in the 2008/09 crisis, the first source said.
During the last phase of buying, which expired last year, the State Reserves Bureau bought fewer metals than originally planned, which analysts said left it with scope to launch another round.
At the launch of the inaugural stockpiling in December 2008, the Bureau said it planned to buy 1 million tonnes of aluminium, 400,000 tonnes of copper and a total of 400,000 of lead and zinc from domestic smelters over three years.
However, it only bought 235,000 tonnes of copper, 590,000 tonnes of primary aluminium and 159,000 tonnes of refined zinc by the end of the round.
"I think the buying would happen in November. It should not be later than Dec. 15 because after that time smelters won't be able to put the sales into this year's earnings."
A sales manager at a large aluminium smelter said he expected the State Reserves Bureau to buy around 400,000 tonnes of aluminium from local smelters very soon.
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