Metals firm sees shares rise on market debut

Despite a slump in the price of commodities, shares of China Molybdenum Co Ltd, a producer of the metals tungsten and molybdenum, closed at more than three times their offer price when they debuted on the Shanghai Stock Exchange on Tuesday.

China Molybdenum shares, which were offered to the public at 3 yuan ($0.47) apiece in the company's IPO in late September, opened at 8.7 yuan on Tuesday and peaked at 9.68 yuan before closing at 9.63 yuan in hectic trading. About 1.57 billion yuan worth of the shares changed hands that day.

That roughly 300 percent premium on the offer price marked the highest such premium seen in any IPO on both the Shanghai and Shenzhen bourses since 2011. China Molybdenum is also listed on the Hong Kong Stock Exchange.

The company raised a modest 600 million yuan in its Shanghai IPO because of widespread concerns about the prospects of manufacturers of metals and other primary products, which analysts have said are under pressure from a sharp contraction in global and domestic demand. Analysts have also said many producers are burdened by overcapacity and large inventories.

This has apparently moved some local governments to begin stockpiling primary products, mainly metals, to help ease the pressure on producers.

For example, Jiangxi province has said it will support industries by purchasing and storing resource products made by local State-owned enterprises, according to an announcement on the provincial government's website on Monday.

The resource-related products include copper, tungsten and rare earths, according to the announcement.

At the end of September, Yunnan province announced it would purchase and store non-ferrous metals, rare earths, copper and other resources.

Despite resource shares' strong performance in the domestic stock market, analysts said various conditions have made resources' prospects in the futures market not especially bright.

The futures prices of resources, including non-ferrous metals and rare earths in the Chinese market, have fluctuated in recent times and may slump further after October because of a decrease in demand, according to a recent report by the resource team with futures brokerage company Baocheng Futures Co Ltd.

Resource use often slows in China after October as the demand for procurement shrinks and manufacturers work to reduce their stockpiles instead of producing more, according to Cheng Xiaoyong, an analyst with Baocheng Futures.

Several types of resources have become more common in inventories in recent months. One million metric tons of copper are now stockpiled in China, as are 1.4 million tons of aluminum ingot, Cheng said.

He added that the consumption of resources may proceed at an even slower pace in the fourth quarter.

wuyiyao@chinadaily.com.cn