China Completes Industrial Metals Stockpiling, Forecasting Neutral to Slightly Bullish Market Response

The Chinese government's announcement that it has completed stockpiling a range of industrial metals is likely to dampen prices in the near term, but analysts predict that prospects for a stimulus-driven revival in demand could sustain or limit the downside of this year's metals rally. Aluminum Corp. of China Vice President Lu Youqing stated that there are no talks with Anglo American PLC regarding a potential investment in Anglo's iron-ore business in Brazil. Simultaneously, Japan's production of flat-rolled aluminum mill products and copper cathode production showed mixed results, with a 5.8% monthly increase but a 26.2% yearly decline in aluminum production and a 20% monthly increase in copper cathode production.

Key Takeaways:

China's completed stockpiling of industrial metals is likely to dampen prices in the near term.
Prospects for a stimulus-driven revival in demand could sustain this year's metals rally or at least limit the downside.
Aluminum Corp. of China's Vice President Lu Youqing denied any talks with Anglo American PLC regarding a potential investment in Anglo's iron-ore business in Brazil.
Japan's production of flat-rolled aluminum mill products increased by 5.8% month-over-month but fell 26.2% year-over-year to 90,177 metric tons in May.
Japan's copper cathode production increased by 20% from a month earlier to 129,995 metric tons in May.
South African ferrochrome producer Hernic Ferrochrome may cut production due to increased electricity costs and a strengthening South African rand.
China's large- and medium-sized steel mills posted profits in May for the first time since October last year.
September copper futures are expected to open floor trading around 1 cent a pound higher on the Comex division of the New York Mercantile Exchange.

Statistics:

China's metal stockpiling may dampen prices in the near term.
Aluminum production in Japan fell 26.2% year-over-year to 90,177 metric tons in May.
Copper cathode production in Japan increased by 20% from the previous month to 129,995 metric tons in May.
South African ferrochrome production may be cut due to increased electricity costs and a strengthening South African rand.
China's large- and medium-sized steel mills posted profits for the first time since October last year in May.

Sources:

"Dow Jones Commodities News via Comtex" - June 29, 2009.
"Aluminum Corp. of China Vice President Lu Youqing's statement to Dow Jones Newswires" - June 29, 2009.
"Ministry of Economy, Trade and Industry" - preliminary data for Japan's aluminum and copper production in May.
"Hernic Ferrochrome (Pty) Ltd. operations director Jasper Pieters' statement to Dow Jones Newswires" - June 29, 2009.
"Xinhua News Agency" - report on China's large- and medium-sized steel mills posting profits in May.
"Comex division of the New York Mercantile Exchange" - expected trading prices for September copper futures on June 29, 2009.
"Comtex SmarTrend Alert" - June 25, 2009.