While Fools conscientiously realign their spending habits with a new economic reality, the Federal Reserve is busy printing dollars and finding new ways to spend them. Meanwhile, across the Pacific, China continues to follow an investment strategy that appears substantially more frugal.
Providing further evidence of a serious commitment to sustain the nation's vast industrial complex, China announced late last week that the State Reserves Bureau will purchase about 300,000 metric tons of aluminum in January. At about a 10% premium to spot aluminum prices, the $540 million purchase will help struggling Chinese smelters to endure this period of weakened demand without resorting to even deeper cuts to productive capacity.
About half of the total will be purchased from Aluminum Corp. of China
The reserves bureau also voiced its intention to purchase 300,000 metric tons of zinc next year. No figures were released concerning copper, but an industry group advising the board suggested a purchase of 400,000 metric tons of copper in 2009. Adding the previous commitment by China's Yunnan Province to purchase 1 million metric tons of various metals, I believe the scope of these purchases collectively will prove far more productive than many analysts concede now. For struggling miners like Teck Cominco
Given some compelling clues emanating from steelmakers like POSCO