DJ China Buys 30 Tons Of Indium, But May Not Signal Stockpiles

Beijing plans to buy 30 tons of indium by year-end, a minor metal used in the manufacture of liquid crystal screens and thin film solar cells, industry sources said. The State Reserve Bureau's purchase plans may just be a one-off move, however, not linked to a wider campaign to stockpile metals, they said.

The bureau on Monday declined to confirm the indium purchase. "We believe it's true, but it may have already been in the works, and it's possible it does not have anything to do with buying reserves because of the economic crisis," said Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association.

China is the world's largest producer of indium, a byproduct of zinc refining, controlling more than 60% of global indium output. Spot prices fell to four-year lows around $400 in mid-November from $600/kg in December 2007, prompting producers to slash output and shutter plants for the rest of the year.

The latest indium purchase revived talk that Beijing was poised to stockpile base metals to prop up smelter operations. Industry agencies, including Wen at the China Nonferrous Metals Industry Association, have lobbied for such purchases.

Wen has suggested the government stockpile aluminum, and restated his support for such a policy in an interview with Dow Jones Newswires Monday, but he added that he was unsure when Beijing might move on such stockpiles, if at all.

Yang Jun, a top official at Tongling Nonferrous Metals Group, China's largest copper smelter, said he agreed reserve purchases would support copper prices, but said he did not know of any move by Beijing to start buying. "So far it's just been the media saying these things," he said. "The government hasn't said anything." Beijing has stayed silent on the prospect of base metal stockpiles.

Yunnan and Guangxi provincial authorities said in early December they intend to buy base metals to help smelters and miners, with Yunnan announcing plans to stockpile 1 million metric tons including copper, aluminum, lead, zinc and tin. However, analysts in China and London have since cast doubt on the proportions of Yunnan's plans, which would require buying substantial fractions of global stock. Guangxi authorities have also reportedly expressed doubt that Yunnan has the funds to pull off such massive plans.

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