Baise, the city in China that triggers the price of aluminum

The lockdown due to COVID-19 of the Chinese city of Baise, little known but crucial for the world production of aluminumhas triggered the price of this metal to almost historical levels.

The price of aluminum reached an unprecedented maximum since 2008, at US$ 3,236 a tonne, and approached its historical record (US$ 3,380.15), in a context of fears about world supply.

What is Baise’s weight?

Located about 100 km from the border with Vietnam, Baise is called the “aluminum capital of South China”.

It produces 2.2 million tons per year, and guarantees 80% of the capacity of Guangxi, the resource-rich region on which it depends.

The Guangxi is the main region of China for the export of aluminum, with about 500,000 tons per month.

China is the world’s leading producer of aluminum, an essential element for many sectors, from coffee capsules to airliners.

What is the situation in the city?

Since Monday, the 3.5 million inhabitants cannot leave the city and part of them have been strictly confined, after the cases of COVID-19 were discovered.

Although the number of cases may seem ridiculous (less than 200) compared to other parts of the world, in China it is considered important.

Since the beginning of the epidemic, the country has applied a “zero COVID” strategy. A single case in a city can lead to a lockdown, travel bans and testing for the virus.

This method has allowed China to return to almost normal life since the spring of 2020, but the restrictions severely affect activity.

What consequences?

Baise’s lockdown has raised concerns about aluminum supply, with global chains already operating on edge due to restrictions around the world due to the pandemic.

A local federation assures that aluminum production is practically at its normal level. But the transport of raw materials is heavily disrupted due to restrictions on movement.

An important industrial park in Baise that includes several factories has simply been closed.

On Wednesday, some smelters were able to resume production, but not all.

One of the main ones, Huayin Aluminium, reduced its production capacity by 1.2 million tons due to logistical disruptions, according to the specialized site Antaike.

Are there other factors?

The calendar does not make things easy.

After a week of holidays in China for the Lunar New Year, which ended on Monday, aluminum reserves have not been able to be replenished.

The holidays had already pushed up prices, at a time when factories were idled despite strong global demand.

Geopolitical tensions between Russia and Ukraine are also fueling this sharp rise in prices.

In effect, “the production of aluminum requires significant amounts of energy”, fundamentally gas, indicates the analyst Fiona Cincotta, of City Index.

Russia is among the largest aluminum producers, along with China.