BEIJING - China's government is using the collapse in commodity prices to further its domestic agenda, with support for stricken sectors tailored to speed up reform plans rather than rescue ailing companies or prop up prices.
To survive plummeting demand for exports -- a sharp turnaround after several years of booming global demand -- many industries are looking for state help and consolidation.
But China's policymakers are sticking to their economic blueprints and not letting sympathy for troubled corporates overwhelm longer-term priorities. Instead, they are favoring the strongest in each industry in a drive toward consolidation, and at the same time using low prices as a chance to stock up.
On Monday, it emerged that China was poised to buy up thousands of tonnes of rubber and sugar to create a bigger state buffer of supplies for the future, adding to efforts to enlarge stocks of everything from oil to corn to industrial metals.
At the same time, however, it's letting small coal mines go to the wall, seizing a chance to make good on years of rhetoric, as well as allowing smaller, less efficient metal producers go under.
"As the fundamental balance moves toward a liberal supply of coal, it is an opportune moment to close small mines and speed up restructuring and consolidation of coal resources," Zhang Guobao, head of the National Energy Administration, said this week.
The government's State Reserve Bureau has begun building up government reserves of metal, buying around 300,000 tonnes of aluminum and 30 tonnes of indium and starting negotiations to add to its zinc and copper inventories.
The timing could hardly be better. Shanghai aluminum futures halved in the second half of last year to a record low of 10,125 yuan ($1,482) per tonne. Prices have fought back to 12,000 yuan, still a level not seen for 15 years. Copper and zinc have fallen by two-thirds since their peaks.
"The authorities are thinking about the issue from a strategic point of view," said a senior researcher at the SRB, who asked not to be named.
"As almost all raw material prices went sky-high in the last few years, China has not built up some of the key state reserves. Now is a much better time to stock up," said the SRB researcher.
China has not revealed how much of each metal it plans to buy, but several sources have put the target for aluminum at 1 million tonnes in total, equivalent to November production at all of China's own smelters.
To survive plummeting demand for exports -- a sharp turnaround after several years of booming global demand -- many industries are looking for state help and consolidation.
But China's policymakers are sticking to their economic blueprints and not letting sympathy for troubled corporates overwhelm longer-term priorities. Instead, they are favoring the strongest in each industry in a drive toward consolidation, and at the same time using low prices as a chance to stock up.
On Monday, it emerged that China was poised to buy up thousands of tonnes of rubber and sugar to create a bigger state buffer of supplies for the future, adding to efforts to enlarge stocks of everything from oil to corn to industrial metals.
At the same time, however, it's letting small coal mines go to the wall, seizing a chance to make good on years of rhetoric, as well as allowing smaller, less efficient metal producers go under.
"As the fundamental balance moves toward a liberal supply of coal, it is an opportune moment to close small mines and speed up restructuring and consolidation of coal resources," Zhang Guobao, head of the National Energy Administration, said this week.
The government's State Reserve Bureau has begun building up government reserves of metal, buying around 300,000 tonnes of aluminum and 30 tonnes of indium and starting negotiations to add to its zinc and copper inventories.
The timing could hardly be better. Shanghai aluminum futures halved in the second half of last year to a record low of 10,125 yuan ($1,482) per tonne. Prices have fought back to 12,000 yuan, still a level not seen for 15 years. Copper and zinc have fallen by two-thirds since their peaks.
"The authorities are thinking about the issue from a strategic point of view," said a senior researcher at the SRB, who asked not to be named.
"As almost all raw material prices went sky-high in the last few years, China has not built up some of the key state reserves. Now is a much better time to stock up," said the SRB researcher.
China has not revealed how much of each metal it plans to buy, but several sources have put the target for aluminum at 1 million tonnes in total, equivalent to November production at all of China's own smelters.
