Financial Times reported that China’s powerful stockpiling agency has purchased base metals on the international market for the first time since prices crashed during the global financial crisis as Beijing takes advantage of the recent price slide.

According to two people familiar with the deal, the Chinese State Reserves Bureau has bought about 30,000 tonnes of nickel, equivalent to one sixth of the stocks in London Metal Exchange warehouses. In recent weeks it has also been making enquiries about copper.

The SRB is one of the most influential movers in the global metals markets. In early 2009, its buying helped put a floor under prices setting the stage for a surge over the next 2 years. But since a peak in 2011 metals prices have fallen sharply with copper, nickel and aluminium all touching their lowest levels in years last month in part as a result of worries about slowing growth in China.

Traders said that the SRB’s purchases may be interpreted as a bullish sign that China has confidence in its future consumption. China has destocked to quite a large degree and prices are at a level where the SRB is buying commodities. If you had bought copper every time the SRB bought copper you would have made a fortune.

They said that while the agency has bought other metals such as aluminium and zinc domestically in the past year as a means of supporting struggling local producers, the nickel imports marked the first time it has come to the international market since a buying spree after the 2008 to 2009 financial crisis. The purchases were executed several months ago but have not been made public.

The price of nickel, an alloy used in stainless steel production, has tumbled 50% since early 2011 and last month hit its lowest in nearly 4 years at USD 14,609 per tonne. Although supplies are plentiful globally, China is heavily reliant on imports of low grade nickel ore from Indonesia which Jakarta has threatened to ban from next year.

Copper prices have also fallen this year, although they remain at more than double their 2008 lows. Copper, used in almost all electric wiring is considered a strategic metal for China since the country requires the metal for its industrialization but must import a large proportion of its needs. Some traders believe the SRB is seeking to buy as much as 200,000 to 300,000 tonnes of copper.

Source - Financial Times.com