China's State Reserves Bureau (SRB) has agreed to buy 300,000 tonnes of aluminium at 12,300 yuan ($1,800) per tonne in January to support producers, trading and industry sources said on Thursday. The SRB will buy around half the aluminium from Chalco, the listed arm of state metals firm Chinalco. The rest will come from seven other smelters, the sources said.
The SRB met the eight firms on Thursday, one industry source familiar with the situation said. "The SRB said they're going to buy 300,000 tonnes in January. They did not say anything about further purchases," the same source said. Several sources said officials were still discussing further purchases and could target 1 million tonnes in total.
Chinese officials have said they plan to buy up resources and materials to support producers, who are smarting from prices that have fallen below the cost of production. The SRB has already bought 30 tonnes of indium, a minor metal used in making LCD screens, from a large Chinese smelter, a trade source said last week. It also plans to buy 300,000 tonnes of zinc, a smelter official said last Friday.
China's aluminium companies, like their competitors world-wide and their peers in other base metals, have been forced to shut in some production to cope with the impact of the global economic crisis, which has crippled demand.
"The government has approved a total reserve build of 1 million tonnes. The SRB has not re-stocked for a long time because prices were so high. And I estimate the state reserve has only about 200,000 inventory of aluminium," said one analyst who declined to be named.