Industrial metals: China to release government reserves

Yesterday, the metal prices have recovered their losses after the U.S. inflation data (see precious metals above) and even turned partly into the plus. Also this morning they show their friendly side. They ignore reports from China. Because according to insider circles, the Chinese authorities will soon release state reserves of metals to cool commodity prices. Accordingly, copper, aluminum and zinc are to be offered. The material can be requested on a monthly basis in certain quantities until the end of the year. With this step, the authorities are also counteracting the physical shortage that can currently be observed in the case of aluminum. In two large aluminum-producing provinces in China, energy allocation was recently rationed, which is likely to have led to supply shortfalls.

The release of state reserves could weigh on aluminum prices. Originally, there was talk of 500 thousand tons. However, the news agencies Reuters and Bloomberg today refer to an elaboration of the independent research institute CRU, according to which it could even become 800-900 thousand tons. On the SHFE in Shanghai, however, the price of aluminum is rising significantly today to CNY 19,000 per ton (equivalent to around USD 2,970). It is thus still a good 7% below its 13-year high from the beginning of May. On the LME in London, a ton of aluminum costs USD 2,500, around 4% less than at its high just over a month ago. The forward curve, which is in backwardation, points to a currently tight aluminum market. The spread between the spot price and the 3-month forward had widened at times yesterday to $20 per ton (the highest price differential in 1½ years), but has subsequently converged again. The further increase in physical premiums also indicates a shortage - at least regionally - if buyers wish to purchase aluminum immediately.

Source: Commerzbank Research, Photo: Fotolia