China about to build up further state reserves of raw materials

According to media reports, China plans to build up further state reserves of raw materials in the next 5-year plan, which begins in 2021. According to the reports, this is a reaction to the corona virus and the deteriorating relations with the USA and its allies. The reserves are to be increased to the extent that they can withstand supply shortfalls that could paralyze the economy. Additional storage capacity is to be built for this purpose. The Chinese government will present the new 5-year plan in October. Although the media reports focus primarily on crude oil and agricultural goods, strategic metals are also to be bought. Which metals are meant, however, is not mentioned.

Last month the news agency Bloomberg reported that China plans to buy 2,000 tons of cobalt, which is used in batteries for electric vehicles. In the past, the State Reserve Bureau, which is under the National Development and Reform Commission, had already purchased metals such as copper. In our opinion, even the recent immense copper purchases of recent months, which were reflected in record high imports, may have been used in part to build up state reserves. China would certainly support commodity prices with extensive purchases. On the other hand, according to a Reuters report, India plans to limit imports of metals, especially copper and aluminum. This is to protect domestic metal producers. India has been importing larger quantities of copper refining for two years, but in our opinion this is due to the failure of the "Tuticorin" smelter. In contrast, aluminum imports have been declining for years anyway.

Source: Commerzbank Research, Photo: Fotolia