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China promises to release metal reserves to address price and shortage concerns

Industrial metals are in the limelight after Chinese authorities have promised to release government reserves to address shortages and high price concerns.

The National Food Strategy Preparatory Department said in a statement Wednesday that it plans to release batches of metals such as copper, aluminum and zinc to make them available to manufacturers.

This move comes from the government’s concerns about rising commodity prices. Factory gate price It reached its highest level since the 2008 financial crisis and was threatened to put pressure on industry profits.

This shows the latest efforts by Chinese policy makers to lower commodity prices. Last month, China’s Economic Planning Agency warned of “excessive speculation” and vowed to tackle the dissemination and hoarding of false information.

Beijing has ordered state-owned enterprises to limit their exposure to foreign commodity markets, according to local reports on Wednesday.

Metal prices initially fell on Tuesday following speculation that China might be preparing to release its reserves. Benchmark copper prices fell 0.2% on Wednesday to $ 9,550 per ton, aluminum fell 0.4% to $ 2,458, and zinc fell 1.75% to $ 2,978.

Metals are driving widespread rises in global commodity prices, initially boosted by a rapid, industry-led recovery from China’s pandemic, and even more active after other major powers began to recover. .. Copper, which is used in everything from electric vehicles to household wiring, hit a record high of over $ 10,500 per ton last month.

China does not officially disclose the national reserves of industrial metals it holds as insurance against rising prices.

Based on the difference between net supply and consumption, Beijing could have stockpiled 500,000 tonnes of copper, 1.5 meters of aluminum and up to 700,000 zinc, analysts said. However, they warned that these were only informed guesses. Looking at these figures, China consumes about 15 million tonnes of copper annually.

Colin Hamilton, an analyst at BMO Capital Markets, said China is unlikely to release large amounts of metal to the market.

“I think this is another rhetoric to tell the Chinese market that they think prices should be lowered,” he said. “They want the market to be organized.”

The government’s warning about speculation in the commodity markets last month hit prices hard, dropping iron ore prices by 10%. In 2020, China will produce a record amount of steel and the steel mills will remain active despite trying to limit production due to environmental issues.

China’s ambition to aim for net zero carbon emissions by 2060 will need to reduce metal production, raising concerns about potential shortages and driving price increases. The country’s role as a major exporter of metals and as the world’s largest consumer and producer of commodities adds to these concerns.

Last month, the Chinese government announced a draft regulation requiring energy-intensive projects to assess carbon emissions.

China promises to release metal reserves to address price and shortage concerns

Source link China promises to release metal reserves to address price and shortage concerns

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