China's Guangxi mulls metal purchase plan

China's minerals-rich border region of Guangxi will consider purchasing metals to help support prices, but has not yet decided, its party secretary Guo Shengkun said on Tuesday.

Guangxi's neighbour in southwestern China, Yunnan province, said on Monday it would purchase up to 1 million tonnes of base metals and minerals and hold them for one year to help shore up prices, an announcement that briefly lifted tin futures in London by over 5 percent.

The Yunnan plan, details of which are not yet clear, would likely involve primary metal as well as metal in ores and semi-finished products. The province also urged metals firms to stock up on copper concentrate and iron ore at low prices.

The Yunnan plan's impact on global markets would be increased if it were joined by other large metal producing provinces, like aluminium-rich Henan in the north, analysts said on Monday.

Chinese provinces are increasingly acting unilaterally to stave off unemployment, protect their local economy and prevent social and political unrest, as the global financial crisis begins to be felt in China's export sector.

The country's industrial output grew by its slowest rate in almost seven years in the year through October.

An announced central government stimulus plan would help Guangxi's metals firms reach their output targets for this year, Guo said, without elaborating.

Guo did not specify which metals would be involved if Guangxi enacted a purchase plan. Guangxi is an important producer of alumina, aluminium, tin, indium and other minor metals.

"Each locality could have its own approach," Guo added.

The State Reserves Bureau has a mandate to buy refined metals when prices are low and sell them at high prices, to help smooth out price fluctuations in China. But that body was stung in 2005, when its trader's massive short position triggered a costly squeeze on the London Metals Exchange.

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