Copper prices rose on Wednesday, recovering from a seven-week low struck Tuesday, despite China’s campaign to reduce speculation and cool rampant metals markets.
The Chinese National Food and Strategic Reserves Administration announced it will soon release state stockpiles of metals including copper, aluminum and zinc in what some analysts said could be the first such move in a decade by the world’s top consumer of metals.
The metals will be sold in batches to fabricators and manufacturers, it said, without giving the volumes to be released.
“The Chinese authorities are trying to help support the margins at (their) manufacturing industry as they have found it hard to transfer these costs to the end-users,” commodities broker Anna Stablum at Marex Spectron told Reuters.
This would be the first publicly announced release of copper from China’s state stockpiles since 2005, when Beijing sought to damp local prices after wrong-way bets by a government trader.
Reserves of aluminum and zinc were also sold in 2010.
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 purchase and sales records.
“We haven’t seen the country release state reserves for years,” Jia Zheng, a commodity trader with Shanghai Dongwu Jiuying Investment Management Co told Bloomberg.
“This will boost short-term supply, sending a bearish signal to the market.”
Goldman Sachs said last month the country’s efforts are likely to be in vain as China is no longer the buyer dictating pricing, with the price dip a clear buying opportunity.
Colin Hamilton, an analyst at BMO Capital Markets, told the Financial Times it was unlikely that China would release significant amounts of metal into the market.
“I think this is another bit of rhetoric to message the Chinese market that they think prices should be lower.”
Mining and steel stocks fell after the announcement, with First Quantum Minerals and Southern Copper down 0.8%. Rio Tinto Plc, BHP Group, and ArcelorMittal SA lost at least 0.7%.
Copper for delivery in July, however, rose 1.2% from Tuesday’s settlement price touching $4.3845 per pound ($9,645 per tonne) Wednesday afternoon on the Comex market in New York.
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