Policy aims to ensure enough supply of metals and other major commodities The central government has outlined a policy to establish strategic metal reserves, but analysts and industry executives say it is likely to focus on reserves development instead of the actual stockpiling of metals. In a document issued by the Ministry of Land and Resources last month, Beijing said it would push phased development of crude oil and key mining reserves. It said reserves-building would be funded by the government and the private sector. It would include product reserves and proved mining reserves, the ministry said. 'This will provide a good foundation to ensure resource supply security, enable macro-market adjustment and cope with sudden incidents,' it said. No details on implementation were given, although the ministry said it would include crude oil, uranium, coal, iron, copper, aluminium, manganese, chromium, rare earth and tungsten. The State Reserves Bureau, estimated by traders to have lost hundreds of millions of US dollars in bad bets executed by a rogue copper futures trader last year, already stockpiles commodities such as copper, aluminium and grains. The government is building crude oil storage facilities in four coastal cities, the first of which will come on stream this year. 'In terms of product stockpiling, the ministry's policy is not new except for expanding the range of metals,' UOB Kay Hian analyst Foo Choy Peng said. 'I think the government will give more incentives to exploring and developing reserves, such as doing away with price controls.' Senior officials at the National Development and Reform Commission have said the controlled prices of certain natural resources in short supply, such as natural gas and coal, will be gradually brought to free-market levels. A senior analyst at Beijing Antaike Information Development said it would be costly to stockpile large amounts of bulky base metals such as bauxite (for making aluminium), copper and iron ore. 'China's bauxite demand was 17 million tonnes last year. Even if you stockpile one million tonnes, it will be a lot to store,' he said. 'Metals of small tonnage such as tungsten would be easier.' A spokesman from the nation's largest coal producer, China Shenhua Energy, said the government's policy was not intended to get producers to stock up on coal. 'What they are after is greater effort on exploration. They want more detailed geological surveys,' he said. 'It's not practical to store a lot of coal, especially in summer as there is the danger of fire.' Unlike crude oil, copper and bauxite, of which China imports 40 per cent to 50 per cent of its needs, coal is in sufficient supply, eliminating the need for stockpiles. The spokesman said the ministry would discuss specific production targets with the country's major coal producers. Between this year and 2010, the ministry is targeting an additional 4.5 billion to five billion tonnes of newly proved geological crude oil reserves, two trillion to 2.22 trillion cubic metres of natural gas reserves, five billion tonnes of iron ore reserves, 20 million tonnes of copper reserves, 200 million tonnes of bauxite reserves and 100 billion tonnes of coal reserves. Only a portion of geological reserves can be recovered after further studies are conducted.