(Bloomberg) -- China is considering the sale of about 500,000 tons of aluminum from state reserves, a move that would help cool the market and meet national emissions objectives, according to a person with knowledge of the plan.
The highly carbon-intensive metal rose to its highest in a decade in Shanghai earlier this month after Inner Mongolia, a major coal-fired production hub in northern China, said it’ll stop approving new projects following a reprimand from Beijing for failing to control its energy consumption.
Releasing stockpiles could offset production losses caused by China’s commitment to limiting energy usage as it plots its course to a carbon neutral economy by 2060. Beijing is also keen to prevent elevated prices from feeding through into inflation, said the person.
Aluminum is used in everything from white goods, to window frames and car parts. The plan and its details, including the volume of metal to be released, are still subject to change, the person said.
Aluminum prices plunged on Tuesday, including a limit-down drop in Shanghai, as traders sold futures contracts on speculation that the government planned to release metal from its stockpiles. Calls to the National Food and Strategic Reserves Administration seeking comment weren’t answered.
China’s primary aluminum output totaled 37 million tons last year. It’s by far the world’s dominant supplier and production in the first two months of the year rose to record levels.
The nation previously sold aluminum from its reserves in 2010, when production cuts aimed at meeting energy-saving targets tightened supply. That same year also saw the sale of commodities from zinc to magnesium, cotton and corn in an effort to ease shortages and curb price gains.
Aluminum in London was trading 1.7% lower. In European markets, Norsk Hydro ASA slumped 4.5%, Granges AB declined 1% and AMG Advanced Metallurgical Group dropped 3%.
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