China Sells Aluminum Stockpiles at Below Market Price

China sold almost all the aluminum ingots it offered from the state reserve at below the prevailing market price, according to the result of a tender posted today on the website of the National Development and Reform Commission.

A total of 95,767 metric tons out of 96,000 tons were sold at an average price of 15,343 yuan ($2,302) a ton through public auctions on Nov. 1 and Nov. 2, said the State Bureau of Material Reserve, also known as the State Reserve Bureau, which comes under the commission. The highest price was 15,920 yuan and the lowest 14,440 yuan, it said.

The government has already sold paper pulp, magnesium, sugar, cotton and corn from state inventories this year in an effort to ease shortages and curb price gains. The sales by China, the world’s largest aluminum consumer, seem aimed at controlling prices following production cuts, Wan Ling, an analyst at CRU International Ltd. said on Oct 22.

“Some of the ingots were produced in the 1970s, so it’s understandable that the price was below the market,” Eric Zhang, an aluminum analyst at Shanghai Metals Market, said by phone. “If you add 500 yuan to 600 yuan in various logistics fees, the prices won’t be that much different from the market.”

Aluminum traded on Changjiang, Shanghai’s largest nonferrous metals market, was quoted around 16,150 yuan a ton early last week when the tender was scheduled to take place.

Metal for delivery in three months traded on the London Metal Exchange declined 0.3 percent to $2,445 a ton at 11:39 a.m. in Shanghai.

Production Loss

Henan province, the largest aluminum producing region, may suspend around 1 million tons of production capacity in the fourth quarter in an effort to meet Beijing’s energy-saving targets, Zhang Fengkui, head of the nonferrous metals office at the Ministry of Industry and Information Technology, said at a conference in Zhengzhou on Oct. 26.

Smelters in the Guangxi region, as well as Qinghai and Guizhou provinces, have also started to shut down aluminum production capacity.

Aluminum production in China may grow to 16 million tons this year, or an increase of 23 percent from 2009, even as the world’s largest producer curbs power supplies to smelters, as new capacity offsets the production losses from power savings, Zhang, the government official, said.

China’s aluminum demand is likely to total 16.8 million tons this year, an increase of 22 percent from 2009, according to Beijing Antaike Information Development Co.

The world’s largest consumer is estimated to have a 350,000 metric ton surplus this year, down from an earlier forecast of 800,000 tons, said Li Yang, an Antaike analyst, on Oct. 27. The bureau will sell 50,000 tons of zinc from state reserves tomorrow.

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