China’s coronavirus lockdown to have ‘inevitable’ impact on aluminium output as zero-Covid policy impact spreads
- The border city of Baise reported 72 locally transmitted cases on Tuesday, pushing the total to 180 since Saturday
- China is the world’s largest aluminium producer, but the lockdown of the resource-rich city on the border with Vietnam is set to disrupt aluminium production
China’s latest coronavirus lockdown has driven up the price of aluminium, with an impact on production expected to be “inevitable”, in the most recent supply chain disturbance caused by the nationwide zero-Covid policy.
The city, which is part of Guangxi Zhuang autonomous region that borders Vietnam, was placed under strict lockdown on Monday with all travel and transport halted.
The travel ban will inevitably affect production as workers are unable to return factories
“The travel ban will inevitably affect production as workers are unable to return to factories,” Xinhu Futures analyst Sun Kuangwen said on Tuesday.
“Road transport was particularly affected, prolonging the delivery of aluminium ingots and impact on aluminium supply in the southern region.”
The spot price of aluminium ingots in the southern region jumped by 2.8 per cent on Monday when lockdown was imposed, and it has risen by 6.5 per cent over the last three days overall to 23,080 yuan per tonne (US$3,625), according to Wind Info.
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3.6 million in southwestern China city of Baise locked down after single Covid-19 case
The price of the most traded aluminium futures rose by 3.3 per cent to 22,685 yuan per metric ton in Shanghai on Tuesday.
Baise’s aluminium capacity is estimated to be 2.4 million metric tons (2.4 billion kg), or 5.6 per cent of the national total.
Its capacity of alumina, a key material in making aluminium, is around 10 million metric tons, or 11 per cent of the national total.
However, considering aluminium smelters have not fully resumed their operation after the Lunar New Year holiday the impact is set to be minimal.
“If the pandemic can be quickly contained and the lockdown is revoked shortly, its impact on the aluminium market will weaken,” Sun added.
We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminium, you name it, we’re out of it
The price rise has also been driven by other factors, including the tensions surrounding Ukraine, but highlights how the pandemic can disrupt the global supply chain and how China’s zero-Covid policy can drive up the price of raw materials and industrial products.
Beijing’s pandemic control policy, with China the world’s largest consumer of commodities from crude oil, bauxite and iron ore and also a major exporter of finished goods, is being closely watched with markets expecting further price increases.
“We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminium, you name it, we’re out of it,” Jeff Currie, Goldman Sachs’ head of commodities research, told Bloomberg TV.
Zero-Covid approach puts China at disadvantage to the West, economists warn
Last week, China’s state planner said that any gaps in supply will be narrowed and any further momentum in the price of international commodities will be minimal.
China is the world’s largest aluminium producer, with output rising by 8.6 per cent from a year earlier to 38.5 million metric tons in 2021, according to data from the National Bureau of Statistics.
It also exported 5.6 million metric tons of unwrought aluminium last year, up by 15.7 per cent from 2020.
Three-month aluminium futures on London Metal Exchange rose by 1.7 per cent to US$3,188 per tonne on Tuesday, which was the highest level since 2008.
