China Yunnan metals plan needs wider support

Proposals by a province in China to buy up a large amount of industrial metals highlights the dire state of global demand but will only really boost prices if other regions follow the lead taken by Yunnan.

Details of the plan have not been finalised, but Yunnan plans to buy 150,000 tonnes of copper, 300,000 tonnes of aluminium, 150,000 tonnes of lead, 300,000 tonnes of zinc and 100,000 tonnes of tin.

Fears of global recession and plunging demand for industrial metals have hit prices. Copper for three-month delivery on the London Metal Exchange is down by more than half since a record high of $8,940 a tonne in July.

The metal used in power and construction was trading little changed at $3,610 a tonne from $3,620 at the close on Friday.

China is one of the world's biggest consumers and producers of metals such as copper and transport material aluminium.

PUZZLING
Yunnan, a major base metals producing province in China, houses Yunnan Copper, Yunnan Aluminium, Yunnan Tin, Luoping Zinc and Chihong Zinc, said the reserves could be kept for a year.

Analysts reckon fierce lobbying by metals producers in Yunnan was probably behind the move and that if Henan province, which produces most of China's aluminium were to annnnounce similar measures the market could react more strongly.

But what is confusing for some is why local government took the lead and not China's State Reserve Bureau (SRB).

Industry sources last week said China is looking at buying base metals to take advantage of the lowest prices for years and boost weak demand.

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