This time I'm not sure whether their intent is to get prices lower or to raise funds for the government.
Not kidding.*
From Hellenic Shipping News, October 10:
China’s State reserves authority on Oct 9 released a total of 150,000 metric tons of copper, aluminum and zinc from the national reserves to alleviate the burden on businesses over rising costs of raw materials.
The National Food and Strategic Reserves Administration said it would step up the monitoring of commodity prices and organize follow-up releases of national reserves....
....MORE
The introduction to Sunday's "Is China’s “age of ambition” over?" put it as succinctly as I know how:
At the moment the Government/Communist party has to come up with a lot of money to ringfence Evergrande and the other property developers, buy foreign hydrocarbons to keep the lights on and maintain social spending to keep a lid on potential unrest. So scale back those hopes and dreams.
Previously on the stockpile sales:
Sept 21
China Seems To Have Been Able To Manipulate Iron Ore Prices Lower
Back in July we explained just how difficult it is to manipulate commodities lower just by talking and selling from stockpiles.* In the case of iron ore, China used a few more of the tools from the toolbox....
August 11
"China’s Commodity Stockpiles Remain A Complete Mystery"
July 29
"China extends zinc reserves sales, copper and aluminium auctions complete"
*July 12
Round II: "China to sell more metals from reserves to ensure stable prices"
The first round of sales sort of fizzled, reminding us that it is not an easy task to manipulate prices.
The three distinct phases of what the Chinese did last time were:
1) Make the decision to sell the metals and experience front-running from some of the comrades at the table
2) Announce the plan to sell some inventory to test how much effect jawboning has
3) Release the metal onto the market
The problem the Chinese had in round I was that prices had already come down fast off the May 10 spike high when they made the announcement so that by the time the metal was put on the market participants were seeing it as a bargain compared to recent prices and absorbed the selling. We did get down to $4.08 but the action that morning looked more like someone getting liquidated by a margin clerk than a bunch of cathodes being offered down.
In some ways what the Chinese are trying to do is similar to a central bank trying to defend its currency: you have a limited amount of ammunition and can't just throw it into the market willy-nilly or you will run out. Just ask Malaysia and the BoE. All the central banks can do is attempt to guide the action that is unfolding. If they can catch the inflection points, the bankers get a magnified effect from their finite resources of foreign exchange. But it is so tricky: too early you waste your reserves, too late and the other side says thank-you for the supply. Just right and at best you amplify and accelerate where the market was going to go anyway. See also Warren Buffet's 1988 letter to the shareholders of Berkshire Hathaway for the denouement of most central bank forex campaigns: "He lied like a Finance Minister on the eve of a devaluation."*
