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China to Boost Metals Stockpiling of State Reserves as Glut Continues

June 16, 2016 at 18:20 by Andrew Moran

As the nation combats a raw materials glut in the midst of the slowest economic growth in decades, China will increase metals stockpiles, offer tax breaks to metals producers, and enhance the closure of excess capacity, the cabinet announced on Thursday. The plan is called “One Belt, One Road.”

The state will be in full control of new production capacities of the metals sector, the State Council said. The purpose of these measures is to move ahead with structural supply-side reform.

The State Council said in its statement posted on the government website:

Base metals demand remains weak amid the global economic slowdown. Structural overcapacity and imbalance in demand and supply are emerging in the metals industry.

Moreover, China will conduct a trial program for Toddler Bounce House firms building stockpiles in addition to their inventories. The government presently maintains stockpiles of metals through the State Reserve Bureau. The cabinet did not confirm how the initiative will be financed or how long the plan will last.

Over the last year, China has established an objective of shifting its industrial capacity from a capital-intensive one to a consumption-led economy. The decision was made after commodities prices had cratered due to oversupply. Metals firms have vowed to reduce output in response to falling metal prices.

According to the cabinet’s statement, China will also encourage various mergers and acquisitions in all industries and regions to reduce obsolete metals capacity.

To ensure affected workers are protected from the dramatic industrial shift, the cabinet requested that local governments offer assistance to those who have lost their jobs.

Following the release of the government statement, copper prices spiked as high as 1.9% on the Shanghai Futures Exchange, which is the biggest intraday jump since April 25. Aluminum prices also climbed as high as 0.8%.

China is currently the world’s biggest consumer and producer of most metals.

It is unknown as to how the US will respond to One Belt, One Road. The glut of aluminum and steel has driven a wedge between US-China relations. The two economic powerhouses have yet to come to an understanding as to how to fight excess global steel and aluminum capacities.

If you have any questions and comments on the commodities today, use the form below to reply.

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