China has announced plans to release industrial metals from its national reserves to curb commodity prices in what some analysts said could be the first such move in a decade by the world’s top consumer of metals.

June 16, 2021

China’s National Food and Strategic Reserves Administration has announced on its website that it would release copper, aluminum and zinc in batches to nonferrous processing and manufacturing firms “in the near future” via public auction.

As per the leading daily — the notice came as Beijing struggles to cool a surge in metal prices this year fuelled by a post-pandemic economic recovery, ample global liquidity and speculative buying that has dented manufacturers’ margins.

China’s May factory gate prices rose at their fastest annual pace in over 12 years due to surging commodity prices, cutting into firms’ profit margins and highlighting global price pressures.

As speculation swirled about such a move before it was confirmed by the government, Citi said in a note on Monday that it could be part of “efforts to crack down on commodity price hikes by managing market expectations and deterring speculators, more than resolving any material physical shortages.”

Citi said the last reported strategic stocks release in China – which did not include copper – was in November 2010. State research house Antaike made parallels between the announcement and the release in 2010.

Benchmark London copper hit a record high of USD 10,747.50 a tonne in May, having risen more than 60% since March last year when the coronavirus destroyed demand. Shanghai aluminum touched its highest since 2010 in May, while zinc jumped to its highest since 2007.

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Citi estimates China’s state reserves currently stand at 2 million tonnes for copper, 800,000 tonnes for aluminum, and 350,000 tonnes for zinc, based on past purchases and sales records.