China is planning to sell stockpiled metals to fight inflation in their prices. Will it be enough? Chuin-Wei Yap reports for The Wall Street Journal:
China said it would begin to sell major industrial metals from state stockpiles, an effort to squelch factory-gate price increases that have hit a 13-year high and are stoking fears of global inflation.
As the world’s biggest buyer of a range of industrial commodities, China is using its market heft to try to quell the sharp rise in global metal prices over the past 12 months, including a 67% surge in copper, a bellwether for macroeconomic health. Economic stimulus measures and a broad resumption of global economic activity from pandemic lows have spurred a spree of buying in China and elsewhere.
China’s latest move targets copper, aluminum and zinc, among other metals, and outlines a program of public auctions to domestic metal processors and manufacturers, the National Food and Strategic Reserves Administration said Wednesday. Still, Beijing’s move comes as some metal prices, including copper, had already begun to decline in recent weeks, amid market sentiment that global supply levels didn’t warrant such rallies.
Beijing’s vast buying power over metals doesn’t necessarily guarantee its ability to tame global prices. London spot prices for aluminum traded largely flat on Wednesday from a month earlier, but have risen 5% from early June as investors shrugged off the likely impact of Chinese sales.
Much of the effectiveness of Beijing’s metal auctions will depend on the amount of metals it releases—or that it is able to release—into the market. The government doesn’t disclose its holdings.
The state stockpiler said in a statement that it planned to release the metals in batches “in the near future” to ensure stable supply and prices of commodities. It didn’t specify the time frame, but past such sales programs have unfolded over months.
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