Speculators run for cover as China threatens to release aluminum to cool speculation and inflation fears.

"CHINA: Clues to Chinese demand for base metals will come this week with industrial production data for May. The consensus is for an activity slowdown.

RESERVES: China plans to release state reserves of non-ferrous metals copper, aluminium and zinc in a programme set to last until the end of 2021, data provider Shanghai Metal Exchange Market and Chinese analysts said." 

Reuters, June 15, 2021

Summary:

• On June 15, European and American metals traders began their day grappling with rumors of a Chinese crackdown on speculation.  
• A prior Reuters article quotes several industry analysts whom estimate that between 300,000 to 900,000 tonnes of aluminum could be released from Chinese reserves. 
• No estimates are known on how much aluminum China has in reserve. However, according to Bloomberg, China produced 37 MMT in 2020. 
• The last time China sold aluminum reserves was in 2010, which was done at below market prices.  
• WSJ added more discussion, especially good for background, on June 15. 

AEGIS Thoughts: Speculators will likely be wary of extending long positions as the prospects of China releasing a significant portion of their reserves remain high. Given that estimates vary widely on how much might be released, and the amount in reserve is unknown, the market could remain edgy.  Likewise, since China has sold reserves at below market prices in the past, bulls may decide to take money off the table.