SINGAPORE — The Chinese government has announced what appears to be a new plan to stockpile strategic commodities.
China will build reserves of metals that are in short supply, including bauxite, chromium, copper, iron ore, manganese and tungsten, the Ministry of Land and Resources said on its Website. The reserves will be built up over the next five years.
The statement did not say if China intends to import more raw materials to build the reserves, or give any indication of how much material it planned to stockpile. China is believed to already stockpile some strategic commodities, including oil, metals and agricultural products, and the statement did not indicate how much of the five-year plan was new.
The plan is aimed at regulating the market, meeting unforeseen circumstances and guaranteeing the supply of resources, the ministry said. The plan also includes measures to increase China’s domestic reserves by increasing mining activities. By 2010, China intends to increase proven resources in the country by 5 billion tonnes of iron ore, 20 million tonnes of copper and 200 million tonnes of bauxite.
The lack of details in the statement, including information about how large a stockpile China intends to build and how it will source the commodities, makes it hard to gauge its impact, Chinese analysts said.
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“If China intends to buy iron ore, lock them up and not use them, that would cause supply tightness,” a steel analyst in Shanghai said. “But if China intends to raise mining development in the country, that would increase supply.”
However, much of China’s ore resources are of poor quality, meaning it will have to import material to build the stockpile, a Shenzhen-based analyst said. “China will probably end up importing more copper concentrate if it wants to stockpile them,” he said.
Greater government oversight of reserves might well help regulate prices and ease supply tightness in the domestic market, an aluminum analyst in Shenzhen said. But it remains to be seen how effective the plan will be.
“The government is probably looking at selling in the market when supply is tight and buying when there is over-supply, what the State Reserve Bureau (SRB) is tasked to do,” she said. “But so far the SRB doesn’t seem to have really achieved its purpose.”
The SRB is the government agency responsible for holding stockpiles of strategic commodities, but its reputation was severely damaged by the Liu Qibing copper trading scandal last year. There was no mention of the SRB in the statement and it was not clear whether it would have a role in the new stockpile plan.
The ministry’s statement was dated April 28, shortly before China’s weeklong Labor Day holiday, but apparently wasn’t posted on its Website until Wednesday.
