China's State stockpiler has issued long-awaited tenders to buy 300,000 tons of primary aluminum and 50,000 tons of refined zinc from smelters, sources with direct knowledge said Wednesday, in a move that would support metals prices.
Domestic prices of aluminum have fallen to their lowest since July 2010, while zinc prices are at their weakest since January.
The latest purchases by the State Reserves Bureau would be equivalent to just over 17 percent of aluminum production and nearly 13 percent of zinc production in February in China, the world's top consumer and producer of the two metals.
"Low prices have prompted high-cost aluminum smelters to cut production," said Jing Chuan, chief researcher at Citic Futures.
"The 300,000-ton purchase of aluminum could provide fuel to drive up prices to above 15,000 yuan ($2,412) in two to three weeks," he said, referring to the front-month contract.
The front-month aluminum contract of the Shanghai Futures Exchange, now March, rose 0.2 percent from the morning session to close Wednesday at 14,670 yuan per ton. Front-month zinc traded at 15,020 yuan per ton.
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