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China eyes releasing up to 900,000 tonnes of aluminium reserves

  • "The stock releases could ... offset some of the shortages caused by imposed curtailments in Yunnan and Inner Mongolia."
  • China churned out 3.35 million tonnes of primary metal in April.
Updated 10 Jun 2021

China is looking to release 800,000-900,000 tonnes of primary aluminium from its state reserves as soon as next month to ease high prices for the metal, consultancy CRU said in a note to clients, citing local market contacts.

China, by far the world's biggest producer of aluminium, rarely sells state metal stockpiles. A 900,000 tonnes release would be bigger than the 500,000 tonnes China was reported to be considering in March but still only amounts to around one-quarter of its recent monthly production levels.

The National Food and Strategic Reserves Administration is seeking to sell off the aluminium "from July in several batches", CRU said in the June 9 note reviewed by Reuters.

The administration did not immediately respond to a faxed request for comment on Thursday.

"The stock releases could ... offset some of the shortages caused by imposed curtailments in Yunnan and Inner Mongolia," the CRU note said. "CRU estimates (state) aluminium stocks are 777,000 tonnes, so this is a surprisingly high number to us."

CRU did not immediately respond to a request for comment.

China churned out 3.35 million tonnes of primary metal in April, a record monthly total.

However, drought in the smelting hub of Yunnan last month reduced hydropower supply, meaning aluminium producers had to cut electricity consumption and metal output. Smelters in Inner Mongolia had earlier cut production as the region sought to meet energy consumption targets.

The aluminium reserves sell-off "will likely deter speculators from going long" on the Shanghai Futures Exchange and should reduce the need for imports in the third quarter, CRU said in the note.

China has repeatedly vowed to crack down on rising commodity prices, which saw producer inflation in May hit its highest in more than 12 years.

Shanghai aluminium is up almost 20% in 2021 amid a strong rebound in demand after the coronavirus outbreak. It touched a decade high of 20,435 yuan ($3,201) a tonne on May 10 but has since eased to 18,440 yuan.