China's minerals-rich border region of Guangxi has completed a draft for a plan to buy metals as adhoc reserves to support local smelters that face weak demand, a local official said on Wednesday.
The official at the industry bureau of Baise city, the top aluminium producing area in Guangxi in southwestern China, said he expected the provincial government to finalise the volumes and prices for the buying plan in about two weeks' time.
The plan was disclosed by its party secretary Guo Shengkun in December last year after neighbouring Yunnan province said it would purchase up to 1 million tonnes of base metals and minerals and hold them for one year to help shore up prices. [ID:nPEK236115]
Since then, the State Reserves Bureau (SRB), the commodity buyer for the central government, has bought 590,000 tonnes of primary aluminium ingots and 159,000 tonnes of refined zinc from local smelters as part of Beijing's plan to support the metal industry. For a factbox of the state buying, please click [ID:nPEK179560].
Chinese provinces are increasingly acting unilaterally to stave off unemployment, protect their local economy and prevent social and political unrest, as the global financial crisis hits China's export sector.
The government completed the draft after discussions lasting two months with county and city governments and local metals firms, including the Guangxi branch of Aluminum Corp of China Ltd (Chalco) (2600.HK: Quote)(601600.SS: Quote), Yinhai Aluminium Corp and zinc producer Nandan Nanfang Nonferrous Metals, according to a statement on the official website of the economic commission of the Guangxi government. (www.gxjmw.gov.cn).
The draft is being reviewed by relevant authorities and companies, an official at the commission told Reuters.
The statement did not give details on the types of metals, prices, or the time of the purchases. Guangxi is an important producer of alumina, aluminium, tin, indium and other minor metals.
Though Guangxi's plan remains sketchy, industry sources say the metal purchases could support local prices and spur imports in the medium term.
The Guangxi government is expected to borrow from banks to buy the metals, the industry official said.
He said the Guangxi government might store the metals in sellers' yards or warehouses and sell the stocks once the market improved. (Editing by Ben Tan)
© Thomson Reuters 2009 All rights reserved