Reuters reported that China's Yunnan province will stockpile 300,000 tonnes of industrial metals from local producers.

The stockpiling plan will be smaller than but similar to, a scheme that the Yunnan government launched about 4 years ago to help local smelters as they suffered from heavy losses and poor demand during the 2008 and 2009 financial crisis.

The stockbuilding by Yunnan's provincial government desperate to keep smelters running in order to maintain tax revenue will help take up some of a glut in the market and offer a lift to domestic spot prices in the near term. China's metals demand has fallen this year as economic activity was hit by the global economic slowdown.

The latest stockpiling plan will include 200,000 tonnes of aluminium, 20,000 tonnes of copper and 50,000 tonnes of zinc while minor metals will make up the rest. One of the companies that received the stockpiling notice was Yunnan Chihong Zinc and Germanium, a medium sized zinc producer with annual capacity of 160,000 tonnes.

The source at Chihong said that we received the notice and held a meeting to discuss it. The company would benefit from the stockpiling plan although it had not decided on how much stocks it will sell to the government. Smelters joining the plan will put physical metal into warehouses monitored by the provincial government and will receive loans equivalent to the market value of those stocks from local banks in return.

The provincial government will pay the interest fees incurred from the loans. The plan will be good for smelters because it will increase liquidity to them. It will also take out some metal from the spot market for a short period of time.

Source - Reuters

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