An expert on the metals market in the People’s Republic of China advised its clients that the Middle Kingdom is preparing to release hundreds of thousands of metric tons of raw aluminium in an effort at depressing the market for the metal.
According to CRU, China’s National Food and Strategic Reserves Administration could release between 800 thousand and 900 thousand metric tons of primary aluminium on the market as early as next month. This surpasses the March total of 500 thousand metric tons that China was suspected to be considering releasing at some point this year.
“The stock releases could […] offset some of the shortages caused by imposed curtailments in Yunnan and Inner Mongolia. CRU estimates (state) aluminium stocks are 777,000 tonnes, so this is a surprisingly high number to us,” read the CRU report dated 9 June.
China’s aluminium output was down from a high of 3.35 million metric tons in May, largely due to a drought in hydropower haven Yunnan Province, which forced electricity rationing and, as a result, production capacity. The drought came as aluminium smelters in Inner Mongolia were already cutting production in order to meet energy consumption goals.
CRU expects that such an infusion of primary aluminium will chill most traders at the Shanghai Futures Exchange from going long in the third quarter as well as quelling the need for outside imports of the metal.
Prices for primary aluminium are up by almost one fifth on the year so far, largely due to a spike in the post-coronavirus market for the metal. Aluminium hit a peak high of US$3,201 per metric ton in May, but it has receded by about 20 percent in the intervening weeks.