China hopes metals sell-off will calm molten market

The first auction of a batch of the state’s metal reserves will take place early next month with 100,000 tonnes of raw materials set to be released into the market as Beijing bids to haul back runaway commodity prices

China’s metals reserves sell-off will happen next month with Beijing hoping the auction will cool raw materials prices and bring stability to the market.

The country’s state reserves administration revealed on Tuesday that it will publicly auction a total of 100,000 tonnes of non-ferrous metals in what will be the first round of a rare and highly anticipated release of its stockpiles.

The National Food and Strategic Reserves Administration said in three separate notices it would auction 20,000 tonnes of copper, 30,000 tonnes of zinc and 50,000 tonnes of aluminium on July 5 and 6.

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The amount of zinc being sold is equivalent to 5.7% of monthly production in China, the world’s biggest metals consumer, based on official data for May. For copper, the auctioned volume is 2.3% of May’s refined output and for aluminium it is 1.5%.

The release of state metal reserves in China is one of a number of attempts by Beijing to cool a stellar rally in commodity prices that has squeezed manufacturers’ margins.

COPPER HIGHS

Benchmark copper prices hit a record of almost $10,750 a tonne last month, fuelled by a post-pandemic economic recovery, ample global liquidity and pockets of speculative buying, but have since eased to around $9,260.

“We expect more sales from reserves combined with slower underlying demand and seasonal weakness to put a lid on prices in the very near term, but we then expect a rally to new highs over the next 3-plus months,” Jefferies analyst Christopher LaFemina said in a note.

“We would be surprised if the [administration] were to sell more than 10% … of its copper reserves,” he added, estimating these to total 1.5 million to 2 million tonnes.

Reporting by Reuters

China to forge ahead with metal sell-offs in bid to calm prices

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.