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China to auction off metals reserve to help tight supply

Steel News - Published on Fri, 29 Oct 2010

It is reported that metals prices keep spiraling up in recent days supported by prediction of tight supply in future. Copper, aluminium and other metals are expected to surge further. Confronting fairly high prices, China\'s State Reserve Bureau are mulling over a plan to auction off metal reserves in the hope to ease market nervousness and tension.

Insiders disclose that it would be good time for SRB to release reserve at the end of this year or the next H1.

China will release 96,000 tonnes of aluminum ingots from state reserves next month through public auctions informed by State Development and Reform Commission. The sales will be held on November 1st and 2nd 2010. It is learned that the aluminium ingots in this auction are mainly home-made goods with some imported ingots from Canada, Sweden, America, Swiss, France and Hong Kong.

SRB had totally purchased and reserved 590,000 tonnes of aluminium during December 2008 and February 2009. The purchase price at that time was CNY 12,350 per tonne to CNY 12,500 per tonne but now the market level stays at about CNY 16,650 per tonne.

The power restriction has been greater and is likely to be more long-lasting on aluminum than on steel. After first production reduction plan from Guangxi and Guizhou, Henan province, the country’s largest aluminum producing region and contributing 25% of total aluminium output, is going to cut output by nearly 20% or 30% in Q4 in an effort to meet Beijing’s energy saving targets.

The production cut also influences output of electrolytic aluminium. In the past September, China churns out 1.172 million tonnes of aluminium down 8.4% from August but the total quantity from Jan to September still rises by 32.5% YoY to 12mln tonnes.

China’s national wide output cut also leads global aluminum production to fall. International Aluminium Institute reports that total output of primary aluminium slips by 2.9% MoM to 2 million tonnes in September Data from World Bureau of Metal Statistics also shows YoY decline of supply surpass from this January to August.

Meanwhile, domestic spot stock continues downturn as before and supply surpasses also ease off thanks to booming demand. In September, China yields 1.96 million tonnes of aluminium products up 23.1% YoY. Downstream consumers hold demand firmly. Last month, auto sales witness a strong increase and investment on real estate also grows.

In analysts’ eye, this round of reserve auction would not exert too much influence on aluminum industry, but it will help to alleviate supply tightness. It is limit supply and increase demand that lend great support to aluminium price. When dollars keep weakening and bulk commodities price surges, China’s government which with the experience of releasing reserve of indium and magnesium has just raised interest rate abruptly is very likely to continue reserve auction in future to resist inflation and press metals price.

(Sourced from
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Posted By : admin on Fri, 29 Oct 2010
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