China said yesterday it would spend about $3bn buying 1m tonnes of base metals, from aluminium to tin, in an effort to cushion its mining and smelting industry from plummeting demand and prices.
The announcement triggered a brief rally in the base metal sector in London and Shanghai, sending tin prices up to 10 per cent higher. But prices dropped later amid traders’ doubts about the plan and a new bout of gloom about the prospects for the global economy.
The move suggests China is willing to absorb excess metal production through stockpiling, stimulating domestic demand or propping up exports through rebates – in an effort to maintain output and employment levels – rather than by encouraging production cutbacks, Barclays Capital said.
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