China Plans to Boost Metals Reserves Amid Commodities Glut (Bloomberg News – June 16, 2016)

China, the world’s top consumer of base metals, will boost stockpiles, accelerate the closure of excess capacity and provide tax breaks for producers as the country grapples with a raw-materials glut amid the slowest growth in decades.

The nation will increase reserves of some metals and study a trial program for companies to build stockpiles in addition to their inventories, according to State Council guidelines posted on its website Thursday. China already holds stockpiles of metals though the State Reserve Bureau. The statement from China’s cabinet didn’t specify a timeline or say how the plan would be financed.

China has set a priority of shuttering surplus industrial capacity as the country shifts from a capital-intensive to a consumption-led economy after commodities prices collapsed because of oversupply. Domestic smelters late last year pledged to cut output as metal prices fell to the lowest in six years.

“Base metals demand remains weak amid the global economic slowdown,” the State Council said in the statement. “Structural overcapacity and imbalance in demand and supply are emerging in the metals industry.”

The country will encourage mergers and acquisitions across industries, regions and among state-owned and private companies to eliminate outdated metals capacity, according to the statement.

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