China to Sell 50,000 Tons of Zinc From Reserves as Power Cuts Lift Prices

China, the world’s largest zinc producer, will sell 50,000 metric tons of the metal from state stockpiles, boosting domestic supplies as an energy-saving drive curbs output and boosts prices.

China will auction the ingots from state reserves on Nov. 9, the National Development and Reform Commission said in a statement. These reserves were bought from domestic smelters between February and May last year, the website statement said.

The government has sold paper pulp, magnesium, sugar, cotton and corn this year in an effort to ease supply shortages and curb price gains. China, also the world’s largest aluminum consumer, planned to sell 96,000 tons of aluminum ingots through a public auction in the past two days.

“It will be the first public auction of zinc by the government,” Feng Juncong, an analyst at Beijing Antaike Information Development Co., said by phone today, forecasting a drop in prices. “It is probably to help offset reduced production as China is limiting power supplies to smelters.”

China will also auction lead from state reserves in the “near term,” Caixin Online reported today, citing an unidentified person with knowledge of the matter.

Zinc for February delivery gained as much as 2 percent to 20,310 yuan ($3,043) a ton today in Shanghai, and traded at 20,180 yuan by 1:38 p.m. local time. Futures have increased 28 percent since June 1.

State Buying

China bought 235,000 tons of copper, 590,000 tons of aluminum, 159,000 tons of zinc, 30 tons of indium and 5,000 tons of titanium for reserves, Caijing magazine reported in June last year, citing Yu Dongming, a metals industry official of the National Development and Reform Commission, the country’s economic planner.

Chinese state buying of raw materials for stockpiling in the first half of last year helped lift commodity prices, with copper and zinc doubling in 2009.

China has started to control output at energy-intensive plants in provinces including Henan, Hebei, Zhejiang and Shandong to meet an energy-saving target. Henan, the nation’s largest aluminum-producing region, may cut output by nearly 20 percent in the quarter ending Dec. 31, the Henan Nonferrous Metals Industry Association said Oct. 9.

Zinc production in China may fall between 30,000 and 40,000 tons in November due to the power limits, Feng said. Still, inventories of the metal are “very high,” she said.

China isn’t likely to sell copper from state reserves under current circumstances, Zhu Bin, president of Nanhua Futures Co.’s research department, said at a conference today.

“The State Reserve Bureau is more likely to sell when the local cash premium is as high as 1,000-2,000 yuan a ton,” said Zhu.

--Helen Yuan, Huiwen Yang. Editors: Richard Dobson, Matthew Oakley.

To contact the Bloomberg News staff on this story Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net.

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