BLBG: Aluminum Declines as China Purchase Seen Short of Expectations
Aluminum declined from a three-week high in Shanghai as a state purchase plan by China, the world’s largest producer and consumer, was smaller than expected. The metal still posted the biggest weekly gain in ten weeks.
China’s State Reserve Bureau will purchase 290,000 metric tons of aluminum at 12,350 yuan ($1,808) per ton from domestic smelters to boost state reserves and stabilize prices by the end of January. The bureau may buy a total of 1 million tons of the metal over three months from January, analysts had said.
“We feel the buying is too small to ease the domestic surplus,” said Eric Zhang, an analyst at commodities researcher CBI China Co. Shanghai aluminum had been steadily pricing in speculation of a much bigger purchase, he said.
Aluminum for March delivery fell 1.6 percent to 11,150 yuan a ton on the Shanghai Futures Exchange, dropping from yesterday’s highest close since Dec. 3. The metal still gained 4 percent this week, the biggest weekly advance since October.
China’s supply of the metal may outpace demand by 500,000 tons next year even after the country idles a fifth of its production capacity by the end of this year, Beijing Antaike Information Development Co. said early this month.
The worldwide surplus jumped about 26-fold to 1.1 million tons in the first 10 months of this year, according to the World Bureau of Metal Statistics.
The metal closed 1.5 percent down at $1,537 on the London Metal Exchange on Dec. 24, the last trading day before the Christmas holidays, bringing this year’s loss to 36 percent.
No Zinc Talks
Government officials, including those from the State Reserve Bureau, who are meeting aluminum producers this week, haven’t scheduled meetings with makers of zinc or other metals yet, Wen Xianjun, deputy chairman of the China Nonferrous Metal Industry Association, said in a phone interview from Beijing.
“As the aluminum purchase turned out to be this small, I wouldn’t pin much hope on zinc, copper or other metals” Zhao Kai, an analyst at Jinrui Futures Co., said from Shenzhen. Aluminum producers have been the hardest hit by the economic downturn among metal makers and would expect most help, he said.
Shanghai copper fell 2.2 percent to 22,380 yuan a ton and Shanghai zinc declined 0.8 percent to 9,655 yuan a ton.
