China to auction more copper, zinc, aluminium reserves

Note: An earlier version of this story mis-stated the change in TC/RCs in the final paragraph

The Chinese government plans to release more copper, aluminium and zinc from its national reserves early next month, adding to two auctions of 270,000t in early and late July.

The country's National Food and Strategic Reserves Administration (NFSRA) will sell 30,000t of copper, 70,000t of aluminium and 50,000t of zinc stocks in the first week of September, in line with plans by the government to increase domestic supplies and cool what it sees as overheated market prices.

"At present, copper, aluminum and zinc prices remain high, and a number of downstream small and medium-sized companies are still facing difficulties in production and operation. The first two releases of 270,000t were well received by the community. We will continue to release state reserves of copper, aluminum and zinc in the future to ensure supplies and stabilise prices for bulk commodities," the NFSRA said before the third auction was announced.

Chinese authorities have stepped up their interventions in commodity markets in recent months, after a surge in prices earlier this year. The NFSRA sold 20,000t of copper, 50,000t of aluminium and 30,000t of zinc in early July, in its first such sales for more than a decade. It then also sold 30,000t of copper, 90,000t of aluminium and 50,000t of zinc stocks in the last week of July.

The open bidding for the third round of base metals auctions will take place on 1 September, with a simulated bidding session held on 31 August. Bidders are required to register no later than 27 August.

The copper and zinc auctions will be held on an online platform operated by diversified metals producer and trading firm China Minmetals. The auction of aluminium stocks will take place on a platform operated by state-owned defence company China North Industries (Norinco).

The metal reserves must be used for the purchasers' own production activities and are not allowed to be stored for hoarding, NFSRA said.

The NFSRA has only released metals stocks once before, in 2010, to prevent rapid prices increases. On that occasion, the metals were distributed to trading firms, while the sales in the first round of auctions were done directly to downstream consumers, market participants told Argus.

"The momentum of the earlier rapid price rises has been significantly curbed, and the first two rounds of auctions have effectively ensured supplies and stablised prices," the NFSRA quoted state-run newspaper Economic Daily as saying.

Copper inventories fell by 90,000t to 177,100t on 21 July when the NFSRA announced the second round of auctions, from 267,100t before the first round, with aluminium and zinc stocks down by 72,000t and 7,100t, respectively, to 809,000t and 103,900t over the same period, the NFSRA said.

The auction volumes are only a small fraction of China's monthly production. The country produced 5.154mn t of refined copper in the first half of this year, up by 12.2pc from a year earlier, including 837,000t in June, national bureau of statistics (NBS) data show. The county's June production for aluminium and zinc was 3.29mn t and 567,000t, respectively.

Argus' copper concentrate treatment and refining charges (TC/RCs) index for smelter purchases edged up to $60.60/t and 6.06¢/Ib today from $60.50/t and 6.05¢/Ib a week earlier amid slow market conditions, following a 3.1pc rise in the previous week as the prospect of supply disruptions eased and buying interest from Chinese smelters fell.