China is committed to freeing up metal reserves to address fears of price and scarcity

Industrial metals stand out after Chinese authorities pledged to release government reserves to address concerns about shortages and high prices.

The National Food and Strategic Reserve Administration said in a statement on Wednesday that it will release bundles of metals, including copper, aluminum and zinc, by making them available to manufacturers.

The move came after the government became concerned about rising commodity prices factory door prices Until the heyday of the 2008 financial crisis and threatened to take profits from the industry.

This is the latest effort by Chinese policymakers to lower commodity prices. Last month, China’s economic planning agency warned of “excessive speculation” and promised to deal with the dissemination and storage of false information.

As reported by the local press on Wednesday, Beijing has ordered state-owned companies to limit their exposure to commodity markets abroad.

Metal prices fell on Tuesday after China was thought to be preparing to release reserves. On Wednesday, reference copper prices fell 0.2 percent to $ 9,550 a tonne, while aluminum fell 0.4 percent to $ 2,458 and zinc 1.75 percent to $ 2,978.

Metals have led to a wide rise in global commodity prices, driven by China’s rapid recovery from the pandemic and the start of the industry and the recovery of other major economies. Copper, which is used from electric vehicles to home wiring, hit a record high of $ 10,500 a tonne last month.

China does not officially disclose the state reserves of the metals industry, which it has as insurance against price increases.

Based on the difference between net supply and consumption, analysts say Beijing can collect up to 500,000 tonnes of copper, 1.5m of aluminum and up to 700,000 tonnes of zinc. However, they warned that they were just informed inventions. To put these figures in perspective, China consumes about 15 million tons of copper a year.

Colin Hamilton BMO Capital Markets analyst said it is unlikely that China will bring large quantities of metal to market.

“I think it’s another rhetoric to convey to the Chinese market that prices should be lower,” he said. “They expect the market to sort itself out.”

The government’s warning about speculation in commodity markets last month hit hard, and the price of iron was 10% lower. In 2020, China produced record volumes of steel and the mills remained active, although the push was made to limit output rather than concern the environment.

China’s goal of zero net carbon emissions by 2060 will lead to restrictions on metal production, adding to concerns about potential shortages and helping to fuel higher prices. Added to these concerns is the country’s role as a major exporter of metals, as well as the world’s largest consumer and producer of raw materials.

Last month, the Chinese government released a draft regulation that required energy-intensive projects to assess carbon emissions.