Aluminum stockpiling fund gives glimpse of China metals reforms – by Polly Yam and David Stanway (Reuters U.S. – January 21, 2016)

HONG KONG/BEIJING – China’s plans to set up funds to manage coal and steel capacity closures and stockpiling schemes offer nervous markets some clarity on the likely future make-up of the country’s sprawling and predominantly state-run metals and mining industries.

As the world’s largest producer of aluminum, steel and other metals, and the biggest consumer of copper and iron ore, China is crucial to global metals markets which have slumped in the past year as Chinese industrial demand growth slowed.

China’s slowdown has hit revenue at global miners such as BHP Billiton and Rio Tinto, and the market is keen to know what China plans for its own state-run mining and metals giants – many of which have kept producing even as prices drop below the cost of production.

After weeks of talks between government officials and leading metals producers, Beijing looks set to take a direct approach to managing capacity cuts and layoffs in coal and steel. It will provide smaller-scale financing deals to groups of producers of non-ferrous metals, such as aluminum, for stockpiling and capacity cutback initiatives.

On Thursday, state media reported that Beijing will allocate 30 billion yuan ($4.56 billion) over the next three years to support the closure of small and inefficient coal mines, and re-deploy some 1 million workers. Similar measures are expected to be unveiled for the steel sector. Both industries have huge over-capacity.

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