Mining stocks fell on Wednesday after China's announcement to release metal reserves to curb commodity prices put miners under pressure.
Major mining stocks weighed heavy on the FTSE 100 (^FTSE) after falling on the news. Rio Tinto (RIO.L) declined as much as 0.9% and is currently trading 0.7% lower.
Anglo American (AAL.L) dropped 2% and Antofagasta (ANTO.L) was down 1.5%, Glencore (GLEN.L) crashed 2.8% and Evraz (EVR.L) declined 1.5%. BHP Group (BHP.L) also lost ground, dropping 1.1%.
"With China having driven much of the upside seen in global commodity prices over the past year, their recent efforts aimed at easing the price pressures have clearly caused major ripples throughout the sector," said Joshua Mahony, senior market analyst at IG.
China said it would release the country's reserves of major industrial metals, including copper, aluminium and zinc in batches "in the near future".
The country's stockpiling body – China’s National Food and Strategic Reserves Administration – said the move would ensure the supply and price stability of bulk commodities.
The reserves will be released to non-ferrous metal processing and manufacturing firms via a public bidding process. It did not specify on quantities of metal to be sold, the auction process or which manufacturers will be allowed to bid.
Read more: The chip shortage bringing car factories to a standstill
It came as Chinese industrial data released on Wednesday showed production grew at a less than expected rates in May as chip shortages dragged down car production.
Industrial output grew at 8.8% year-on-year in May 2021, against expectations of 9.2% growth, according to data from the National Bureau of Statistics (NBS). Production was hit by a rise in COVID infections in Guandong province and fresh restrictions have impacted a number of electronic manufacturing plants located in the region, especially chips and semiconductors.
"The declines in Chinese industrial production seen today highlight the pressure put on economic growth by rising input prices," said IG analyst Joshua Mahony. "With the Chinese announcing that they will start to periodically release reserves of aluminium, copper, and zinc, we are seeing that the country clearly has intentions to do all it can to quell the rise in commodity prices."
The State Council said in May that it would take measures to ensure supply and stable prices for commodities, and regulators had previously warned it would adopt a zero-tolerance policy to market manipulation or hoarding of metals.
The world's largest metals consumer has been struggling to tame a surge in metal prices this year fuelled by a post-COVID economic recovery, ample global liquidity and speculative buying that has dented manufacturers’ margins.
Watch: Could mining make a comeback in Cornwall?