Industrial metals: China will release more state reserves of metals next week

According to an announcement by the National Food and Strategic Reserves Administration, China will release more state reserves of metals next week. According to the report, 30 thousand tons of copper, 50 thousand tons of zinc and 90 thousand tons of aluminum will be sold on July 29. This is a combined 70 thousand tons more than the first auction on July 5 (20 thousand tons of copper, 30 thousand tons of zinc, 50 thousand tons of aluminum). The authority says it is confident and sure that with this step it will be able to stabilize expectations and cool down prices.

In an initial reaction, however, LME metals prices have risen. Copper traded at times yesterday at just under $9,400 per ton, and zinc and aluminum had recouped some of their initial losses. Some market participants apparently do not yet consider government sales high enough to satisfy demand. In our view, however, it should not be forgotten that the authority has announced that it will continue to sell reserves until the end of the year. In the case of aluminum, there was speculation in advance of sales of between 500 thousand and 900 thousand tons. In the further course of trading, the metal prices then came back a bit. As a statement from the National Development and Reform Commission indicates, local governments have been asked to intensify price control and expectation management. With the measures taken so far, the Chinese authorities have "only" succeeded in preventing further price increases. A sustainable correction has not yet been achieved. This obviously requires even stricter measures or a fundamental change in sentiment on the financial markets. So far, losses have been recovered relatively quickly.

Source: Commerzbank Research, Photo: Fotolia