SHANGHAI, Oct. 23 (SMM) -- According to the latest announcement, Yunnan province will purchase non-ferrous metals as reserves from September to December 2012, including 20,000 mt of copper, 200,000 mt of aluminum, 50,000 mt of zinc, and 10,000 mt of tin and other nonferrous metals. SMM believes that Yunnan government’s plan is aimed to provide secured financing support for nonferrous producers.

It is reported that Yunnan government will mainly purchase nonferrous from Yunnan Aluminum, Yunnan Copper, Yunnan Chihong Zinc & Germanium, and Luoping Zinc & Electricity and other nonferrous metal producers, and procurement prices will take market price as reference.

These producers can apply for loans from banks by using inventories as pledge, and Yunnan government will pay interest for the loans. The pledge will belong to these nonferrous producers after the reserving period is ended. In fact, the reserve plan by Yunnan government is to ease producers’ cash flow pressure via subsidized loans, which is a great help for nonferrous metal producers that have been squeezed by tight cash flow pressure for a long time.

According to 1H earnings report from listed companies, Luoping Zinc & Electricity suffered RMB 68.77 million losses in 1H 2012, with asset-liability ratio as high as 88.12%. Yunnan Aluminum reported RMB 25.07 million losses in 1H, and has RMB 1.52 trillion cash, only accounting for 9.07% of its assets.

Yunnan government will purchase 20,000 mt of aluminum largely from Yunnan Aluminum, which will provide RMB 3.09 trillion secured financing for the company based on average aluminum spot prices at RMB 15,465/mt on September 25th.