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Wednesday, 3 December 2008
Beijing Plans to Buy More Metals
The central government is considering buying all types of base metals as reserves to help boost domestic demand, Wen Xianjun, vice-chairman of state-funded China Nonferrous Metals Industry Association, said on Wednesday.
The central government is considering buying all types of base metals as reserves to help boost domestic demand, Wen Xianjun, vice-chairman of state-funded China Nonferrous Metals Industry Association, said on Wednesday.
Previously Mr. Wen had said that the mainland could buy up stocks of aluminium to help struggling smelters. But the central government may cast the net much wider.
“All base metals are being considered,” he told reporters on the sidelines of a conference in Sanya on China’s Hainan Island.
Mainland’s metals sector has been hit hard by a slump in demand, which has caused stocks to build up and prices to plummet, forcing many to suspend part of their production.
The government, keen to offset the impact of a residential housing crisis and the global financial turmoil, has announced a 4 trillion yuan (HK$4.5 trillion) stimulus package to revive the economy.
Officials have said they plan to buy up stocks of resources and materials to shore up prices and the government has already begun buying up grains and soybean to support farmers, but it has yet to reveal its ambitions to build state metals reserves.
Earlier this week, Yunnan province, a major base metals production region in southwest of the country, broke ranks by saying it planned to buy up 1 million tonnes of metals, ores and semi-finished products to support local industry.
Neighbouring Guangxi may follow suit.
But one economist sounded a sceptical note about the idea of the government hoovering up metals stocks.
“It’s hard to believe why the government would want to buy up all that stock. The question I have to ask is for what purposes? To help enterprises?” said Wensheng Peng, economist at Barclays Capital in Hong Kong.
“There are better ways to do that, by giving those firms money for example. Given the current low prices, it makes sense to build strategic stocks. There is a lot of confusion about the potential stockpile builds. More clarity and details are needed.”
Zhang Liqun, director of Financial Research Institute of the Development Research Centre at the State Council, the cabinet, said buying metals reserves would ease pressure on smelters that were struggling with weak domestic demand and low prices.
“Considering its impact on jobs, buying reserves can be considered,” Mr. Zhang told the conference in Sanya.
Weak demand has driven up aluminium stocks in the mainland. About 1.1 million tonnes of aluminium are estimated to be sitting at warehouses and smelters’ yards versus about 1 million tonnes in late November, industry sources at the conference said.
The key Shanghai aluminium futures contract hit a new 15-year low on Wednesday, after state-owned research group Antaike predicted domestic demand growth for aluminium would slow to 3 per cent next year from 8.5 per cent this year.
Mr. Wen said banks should buy aluminium as an investment due to the low price, adding that he believed production costs would be higher than current metal prices within 3-5 years.
“If I was a banker and I had money, I would buy aluminium now,” he said.
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Beijing Plans to Buy More Metals
Reuters in Sanya
3 December 2008
The central government is considering buying all types of base metals as reserves to help boost domestic demand, Wen Xianjun, vice-chairman of state-funded China Nonferrous Metals Industry Association, said on Wednesday.
Previously Mr. Wen had said that the mainland could buy up stocks of aluminium to help struggling smelters. But the central government may cast the net much wider.
“All base metals are being considered,” he told reporters on the sidelines of a conference in Sanya on China’s Hainan Island.
Mainland’s metals sector has been hit hard by a slump in demand, which has caused stocks to build up and prices to plummet, forcing many to suspend part of their production.
The government, keen to offset the impact of a residential housing crisis and the global financial turmoil, has announced a 4 trillion yuan (HK$4.5 trillion) stimulus package to revive the economy.
Officials have said they plan to buy up stocks of resources and materials to shore up prices and the government has already begun buying up grains and soybean to support farmers, but it has yet to reveal its ambitions to build state metals reserves.
Earlier this week, Yunnan province, a major base metals production region in southwest of the country, broke ranks by saying it planned to buy up 1 million tonnes of metals, ores and semi-finished products to support local industry.
Neighbouring Guangxi may follow suit.
But one economist sounded a sceptical note about the idea of the government hoovering up metals stocks.
“It’s hard to believe why the government would want to buy up all that stock. The question I have to ask is for what purposes? To help enterprises?” said Wensheng Peng, economist at Barclays Capital in Hong Kong.
“There are better ways to do that, by giving those firms money for example. Given the current low prices, it makes sense to build strategic stocks. There is a lot of confusion about the potential stockpile builds. More clarity and details are needed.”
Zhang Liqun, director of Financial Research Institute of the Development Research Centre at the State Council, the cabinet, said buying metals reserves would ease pressure on smelters that were struggling with weak domestic demand and low prices.
“Considering its impact on jobs, buying reserves can be considered,” Mr. Zhang told the conference in Sanya.
Weak demand has driven up aluminium stocks in the mainland. About 1.1 million tonnes of aluminium are estimated to be sitting at warehouses and smelters’ yards versus about 1 million tonnes in late November, industry sources at the conference said.
The key Shanghai aluminium futures contract hit a new 15-year low on Wednesday, after state-owned research group Antaike predicted domestic demand growth for aluminium would slow to 3 per cent next year from 8.5 per cent this year.
Mr. Wen said banks should buy aluminium as an investment due to the low price, adding that he believed production costs would be higher than current metal prices within 3-5 years.
“If I was a banker and I had money, I would buy aluminium now,” he said.
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