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China has released details of its first round of non-ferrous metals auctions from its state reserves, and market reaction has been unsatisfactory.
The National Food and Strategic Reserves Administration reported Tuesday that it will auction 20,000 tons of copper, 30,000 tons of zinc and 50,000 tons of aluminum on July 5-6.
The rare auction of strategic reserves is part of Beijing’s efforts to reduce the heat in commodity markets, which have seen metals such as copper and iron ore reach all-time highs amid a surge in demand as the world recovers from the coronavirus pandemic.
However, the market’s initial reaction to the auction announcement would indicate that the volumes on offer are too small to make much of a difference in the world’s largest importer, producer and consumer of industrial metals.
The amount of copper sold is only 2.3% of China’s production of the refined metal in May, and 4.4% of raw copper imports in the same month.
For zinc, the auction represents about 5.7% of China’s monthly production, and for aluminum it is only 1.5% of May’s production.
It could be that the Chinese authorities are just testing the market to see what the appetite is for sales, and will increase volumes in subsequent auctions.
But for now, the market reaction is probably well below what the authorities would have liked.
