Guangxi epidemic affects global aluminum prices? Experts: The continuous tight production supply at home and abroad is the root cause

Source: Global Times - Global Network

Due to the impact of the epidemic in Guangxi Baise, China's aluminum supply was impacted, the market aluminum price rose sharply, and the highest intraday point of the Shanghai aluminum main contract touched 22920 yuan per ton on the 9th, only a stone's throw away from the 14-year high set in October 2021.

Agence France-Presse reported on the 9th that Guangxi is one of the important aluminum production areas in China, and the production capacity of electrolytic aluminum and alumina in the area is mainly concentrated in Baise City. With a population of 3.5 million, Baise is the center of aluminum mining and production, with an annual output of 2.2 million tons, known as the "Aluminum Capital of South China". However, Bose is currently experiencing a severe epidemic and began to implement a "lockdown" on February 7, which has an impact on aluminum production in the region.

As an important raw material for modern industry, aluminum is widely used in building materials, automobiles and other industries. The local aluminum industry association of Bose said on Tuesday that the current aluminum production is basically at a normal level, but the transportation of aluminum ingots and raw materials has been seriously affected, thus exacerbating the market's expectations for the phased tightening of aluminum production.

However, Li Jiahui, an analyst at the market agency SMM Aluminum, said in an interview with the Global Times reporter on the 9th that the control of Guangxi Baise due to the epidemic is only the fuse for the rise in global aluminum prices, and the fundamental determining factor is the continuous tight production and supply at home and abroad. Li Jiahui analyzed that on the one hand, the domestic aluminum ingot inventory has been tight, and due to the dual control of domestic energy consumption and power shortages, the domestic electrolytic aluminum production has been reduced significantly, and increasing production requires a considerable period, these factors are superimposed, resulting in the supply in the first quarter of 2022 is difficult to reach the same period in 2021.

The supply of aluminum in the international market is also tight. Due to the tight energy supply, high natural gas and electricity prices have pushed up production costs, and European aluminum companies have also cut production significantly. Li Jiahui said, "In the case of imbalance between supply and demand in domestic and foreign markets, the epidemic in Bose has become a fuse for the rise in aluminum prices."

Li Jiahui believes that aluminum is a high-energy-consuming industry, and its price is often positively correlated with the price of coal grid and electricity. At present, the state is controlling the price of coal, which will be a negative for the rise in aluminum prices.

For the future trend of aluminum prices, Li Jiahui said that the trend of the epidemic in Guangxi Baise is not a decisive force. Baise's production capacity of more than 2 million tons in the country's total production capacity has not yet played a decisive role, and its impact may be limited to the South China market, because Shandong, Xinjiang, Inner Mongolia and Yunnan are all aluminum industry powerhouses, of which Shandong has the first output in the country, and the current production is normal. (Reporter Ni Hao)

(Source: Global Times)