China's Yunnan launches metal stock plan with quotas

China's Yunnan province has launched its plan to support local metals firms by offering to buy more than half of the 1 million tonnes of base metals it will use to collatoralise bank loans, state media reported.

The first phase of Yunnan's plan, announced in early December, will include 180,000 tonnes of aluminium, 30,000 tonnes of tin, 236,000 tonnes of zinc, 104,000 tonnes of lead and 2,000 tonnes of copper, the official Xinhua said late Tuesday.

The metals are equivalent to nearly a fifth of China's monthly aluminium production, more than double its tin output, and two-thirds of its zinc production.

Under the plan, many details of which were reported earlier this week by local firms, Yunnan Province will subsidize storage costs and interest for loans from local banks using the metal stocks -- sequestered by the companies themselves or held in reserve by the government's stockpile agency -- as collatoral.

Officials are hoping the plan will help companies finance operations despite the sharp downturn in prices and weakening demand, sparing the province job losses or lost revenue.

Unlike Beijing's state-run strategic metals reserves, which usually buys metal for strategic purposes and holds it for an indefinite period of time, Yunnan province will only hold the metal until the end of next year at the latest.

Nine producers in Yunnan, including Yunnan Aluminium 000807.SZ, Yunnan Tin 000960.SZ, Yunnan Copper 000878.SZ, Yunnan Luoping Zinc 002114.SZ and Chihong Zinc (600497.SS), were invited to sell to the provincial government's plan.

A source at one of the producers said they were allowed to sell the metal within one year and the prices would be based on spot prices in domestic market.

Some producers have said they are already shipping the metal. 

The plan calls for the building of a reserve of 1 million tonnes of base metals -- 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 -- to take advantage of lowest prices in years. [ID:nHKG177952] [ID:nPEK2687]

Yunnan Aluminium said in a statement on Tuesday the firm had received the invitation to sell up to 180,000 tonnes for the reserve-building plan. For now, it plans to sell 160,000 tonnes.

Yunnan Copper said Tuesday it had proposed to sell 2,000 tonnes of refined copper to the plan. [ID:nHKG272498]

On Monday, a Yunnan Tin executive told Reuters the firm had proposed selling 30,000 tonnes of tin to the province's plan and was transporting the metal to a warehouse which was operated by the central government's State Reserves Bureau.

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