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Thursday, June 20, 2024

China is going to sell metals from state reserves to curb price increases

China has announced its intention to start selling key industrial metals from government reserves in an effort to contain rising prices.

Producer prices (PPI) in the country jumped 9% in annual terms last month, the most significant increase since September 2008.

The rise was noted for the fifth month in a row, in April it amounted to 6.8%.

China is the world’s largest consumer of many manufactured goods.

Using his influence, he will try to mitigate the strong rise in the value of metals in the world.

Copper, in particular, has risen in price by 67% over the past year, The Wall Street Journal notes.

As the National Food and Strategic Reserves Administration reported on Wednesday, the PRC government’s decision concerns, among other things, copper, aluminum and zinc.

The metals will be sold to Chinese converters and producers through public auctions.

The effectiveness of these auctions will largely depend on the volume of metals offered for sale, experts say.

“Investors are keeping a close eye on the amount of reserves that actually appear in the market,” according to a report by commodity analysts at ING Bank. “More important is the message that the Chinese authorities are sending to the market in their efforts to contain excessive increases in commodity prices.”

Certain types of raw materials account for only a small part of the final cost of a consumer product.

It is unlikely that raw material prices alone can significantly affect the cost of products for the end customer. However, the widespread rise in prices raises concerns that the situation in China may affect consumer prices in other countries through exports.

In particular, Chinese exporters this year have raised prices for products such as furniture and footwear.

The strongest rise in the value of Chinese exports to the United States in nearly a decade was also driven by the appreciation of the yuan against the US dollar.

Analysts say it is unclear whether sales of the metal will have a significant impact on China’s PPI.

The State Statistical Office of the country explained the surge in industrial inflation also by the rise in prices for those types of raw materials that are not included in the auctions – oil and iron ore.

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The purchasing power of China is not able to affect their value in world markets, writes WSJ.

“Industrial inflation pressures are likely to persist and create additional risks to economic growth,” Citigroup economists said in a statement earlier this month.

There is no quick solution to the problem of rising prices, provoked by the rise in prices for commodities, they believe.

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