China’s National Food and Strategic Reserves Administration said June 16 it will start releasing copper, aluminum and zinc stocks in several batches to downstream processors in the near term, a move seen as to ensure supply and stabilize prices in domestic markets.

More details on the stock selloff will be released later, according to the administration’s statement.

Following the news, copper and aluminum contracts on the Shanghai Future Exchange, or SHFE, continued on a downtrend, after months-long market chatters around the stock release were finally confirmed.

Market sources expect domestic aluminum prices to remain rangebound in the near term, as demand from downstream users remained strong and output cuts continue.

However, the stock selloff and China’s measures to clamp down on soaring commodity prices may weigh on domestic markets to some extent.

“It’s uncertain when the state stockpiles will be released and the volume will not be large if the stockpiles will be released in several batches,” said a Chinese trader, adding that it is difficult to see any significant increase in domestic aluminum prices in the near term.

“We are now hearing that 80,000 mt of the state stockpiles will be released each month till the end of the year. This would suggest that the total quantity is round 480,000-560,000 mt, which is less than the rumored 800,000-900,000 mt,” said an international trader.

Price action
Many participants were still monitoring the situation closely, as it will have a significant impact on domestic aluminum prices and help ease supply tightness seen in the spot markets, if huge volumes of stocks are released, some sources said.

SHFE’s most-active aluminum and copper cathode contracts fell for the second straight day after trade resumed following the Dragon Boat Festival holidays. The aluminum and copper contracts for July delivery closed at Yuan 18,590/mt ($2,911/mt) and Yuan 68,450/mt ($10,719/mt) on June 16, down 1.9% and 2.5%, respectively, from the previous close.

The SHFE’s aluminum contract has come off of a more than 13-year high of Yuan 20,420/mt on May 10. Similarly, the copper contract reached Yuan 77,720/mt on May 10, the highest level not seen since May 18, 2006. The soaring commodity prices have been seen as severely challenging for end-users.

China’s aluminum and copper prices have trended downwards amid the volatility, following a series of State Council’s executive meetings in May that aimed for reining in unreasonable price surge in commodities.