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China moves to curb inflation with deposits requirements

Date: Tue, 30 Aug 2011 | Author: Paul Sanderson

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Raw material demand from China could be reduced after its government introduced inflation taming measures.

The Chinese government is extending reserve requirements to margin deposits that commercial banks collect from customers in an attempt to curb credit growth and keep inflation under control.

It is estimated by Bank of America Merrill Lynch that this could drain 900 million yuan (£86 billion) from the banking system.

Galaxy Futures analyst Che Hongyun told Reuters: “[The move] shows the country’s resolve to control inflation, which is slightly bearish for the base metals market as it crimps money liquidity.

“However, it’s possible that China has stepped into the copper peak consumption season ahead of normal because the big users such as wire and cables are now seeing more orders with expansion of China’s power network.”

The LME was closed on Monday for the Bank Holiday.

On Friday, copper continued its price rally seen at the end of last week, breaking the $9,000 barrier once again. Three-month copper was priced at $9,118 (£5,606) from $8,924 (£5,449) on Thursday.

Aluminium was virtually unchanged at $2,367 (£1,455) from $2,368 (£1,446) on Thursday. Alloy up to $2,270 (£1,396) from $2,368 (£2,235) on Thursday.

Lead was priced at $2,460 (£1,485) on Friday up from $2,391 (£1,460) the day before. Nickel was at $21,270 (£13,077) up from Thursday’s $21,050 (£12,853).

Tin was up to $23,750 (£14,602) from $23,450 (£14,319) on Thursday. Zinc priced at $2,241 (£1,378) on Friday from $2,214 (£1,352) a day earlier.

Steel finished the week at $580 (£357) up from $575 (£351) on Thursday.

Category: Recycling
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