China’s Government Pledges Crackdown on Aluminium Speculators

In an effort at clamping down on “excessive” speculation in the nonferrous metals market that may lead to price distortions, the People’s Republic of China’s Ministry of Industry and Information Technology (MIIT) declared last week that it would step up efforts at monitoring the practice.

The MIIT said on Wednesday that it intends to increase efforts at discouraging the practice by working with trade associations and government agencies. Though other metals have attracted the attention of speculators on the Shanghai Futures Exchange, including copper and nickel, MIIT expressed especial concern as to the practice in relation to aluminium trading.

The emphasis dovetails with the MIIT’s declaration that the metal would be a priority for the ministry in the current year. The state says it also plans to implement an aluminium capacity replacement regime, which involves industry quotas, transfer of those quotas, mergers and acquisitions between and among producers, and an accelerated phasing out of inefficient smelting capacity.

Though capacity cuts have led to measurable gains in the country’s aluminium market, the late rally has not been without a stumble or two. A combination of permanent capacity closure and prospective seasonal cuts helped push aluminium’s price in Shanghai up by 26 percent through the first three quarters of last year. However, the market has lost a bit of steam since then, receding by 17 percent in the intervening months.

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