China to Auction 117,000 Tons Aluminum From Reserves

Nov. 16 (Bloomberg) -- China, the world’s biggest aluminum producer and consumer, will sell a second batch of ingots from state reserves next week to temper prices.

The State Bureau of Material Reserve will auction 117,000 metric tons of aluminum on Nov. 23 and Nov. 24, the National Development & Reform Commission said today on its website. The agency, which manages China’s metals reserves, sold 95,767 tons on Nov. 1 and Nov. 2 at an average price below the prevailing spot price.

Speculation that the government will intensify measures to curb inflation, including higher interest rates and price controls, drove China stocks today to the lowest in a month. China, whose consumer price index rose 4.4 percent in October, the fastest in two years, has also sold zinc, lead, paper pulp, magnesium, cotton, and corn reserves to ease supply shortages and prices.

“It’s one of the ways to show they are determined to control inflation,” Yu Mengguo, head of research at Jinpeng International Futures Co., said from Beijing. “They are not flooding the market with large quantities but rather sending a signal that they think prices have climbed too high.”

Suspended Capacity

Spot aluminum price quoted on Changjiang, Shanghai’s largest nonferrous metals market, was about 16,280 yuan ($2,449) today, compared with 16,150 yuan when the first tender was held on Nov. 1 and Nov. 2. Prices have gained 17 percent in the second half as smelters in Henan, Guizhou, Qinghai provinces and Guangxi region have suspended capacity as local governments try to meet Beijing’s energy-conservation goals for the five-year plan ending 2010.

“They’re worried about the unintended price consequences of this strategy,” Peter Richardson, chief metals economist at Morgan Stanley Australia Ltd., said on Nov. 10, when asked how China’s energy curbs were tightening the market.

Approximately one-third of China’s aluminum smelting capacity has been affected by the country’s energy-saving power curbs, and total output this year may fall short of the 17 million tons forecast, Xiao Chongxin, executive general manager of Sanmenxia Tianyuan Aluminum Co., said on Nov. 11.

Three-month aluminum on the London Metal Exchange reached a 25-month high on Nov. 11 and declined 1.1 percent to $2,374 a ton at 3:31 p.m. in Shanghai.

--Helen Sun, with assistance from Glenys Sim in Singapore. Editors: Indranil Ghosh, Richard Dobson

To contact the Bloomberg News staff on this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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