China to auction 20,000 odd tonnes of copper in the worst selloff in 15 months

Some 20,000 tonnes of copper are to be publicly auctioned on July 5-6 in the first round of an unusual release of stockpiles from Beijing’s National Food and Strategic Reserves Administration.

China has also been shipping domestically available copper to overseas destinations, in an attempt to dampen international prices as well. Chinese copper exports rose for the third month in May to the highest since March last year, data showed.

The impact of all this is a 9.5 per cent drop in copper futures traded both on the LME, or London Metal Exchange, and New York’s COMEX. The last time copper lost that much in a month was in March 2020, at the outset of the coronavirus pandemic, when it dropped almost 12 per cent.

The current scale of China’s planned metal sales appeared enough to scare some speculative froth out of the market, Bloomberg said in a mid-June report.

As the world’s largest buyer and hoarder of commodities, China is uniquely positioned to let prices of raw materials rise when they don’t hurt its economy, and crack down on them when the opposite is the case.

State-owned Chinese companies have been ordered to control their risks and limit exposure to overseas commodities markets, Bloomberg said in a recent commentary. In a related move, government stockpiles of copper, as well as aluminum and zinc , will be released to fabricators and manufacturers in order to clamp down on prices of these metals.

“The size of Beijing’s strategic metal stockpiles is a closely guarded secret, so anyone buying on the hope of rising prices is facing a seller who may well have an unfathomably large warehouse of metal to keep levels suppressed,” Bloomberg had said in its report.

But even so, there’s plenty to suggest that China’s metals demand is so fundamentally strong that keeping prices lower for longer would be a hard task.

Commodity analysts, however, argue that China’s attempts to wear copper prices down over the long-term might not work well, saying despite Beijing manoeuvres, the metal hasn’t exactly collapsed due to global recovery spending by governments all over the world.

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