China’s provincial governments plan to incentivize companies to buy and store non-ferrous base metals to avoid stockpiling of inventory with metal producers and boost economic activities in their regions.

 

Yunnan province in the southwest of China was the first to initiate the scheme, which directs state and city governments to support companies in buying and storing aluminium, copper, lead, zinc and other key non-ferrous metal products. The province has set a volume target of 800,000mt purchases to be completed within a year.

 

Buyers can seek funding for the purchase of these metals through bank loans in the form of product pledges. The funds needed for storage can also be obtained through bank loans. Yunnan province has allocated CNY1bn as special funds to provide partial discounts on bank loans for these base metal purchases. Companies will receive 80pc subsidy on loans for the purchase of non-ferrous metals tin, germanium, and indium and 60pc subsidy on loans for the purchase of copper, electrolytic aluminium, lead, and zinc.

 

Following the footsteps of Yunnan province, northwest province Gansu is also mulling to sponsor companies to buy non-ferrous metals, according to local media reports. Gansu has drafted a 7-month plan to support companies buy over 400,000mt non-ferrous metal from May onwards.

 

Besides revitalizing the economy, these purchase promotion schemes are aimed at reducing the stockpile of metal inventories with enterprises which are struggling to weak demand. Post the global financial crisis of 2008, China has implemented a similar but centralised procurement plan to reduce metal inventories. Other provincial governments with a large presence of smelters are expected to announce similar schemes to promote base metal purchases.

 

($1=CNY7.08)

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