Guinea is a key supplier of bauxite, aluminum raw material and markets are concerned about possible supply disruptions.
Aluminum peaked in more than a decade as political unrest in Guinea fueled concerns over the supply of the raw material needed to make the metal.
A military unit took power and suspended the constitution, with the head of special forces, Colonel Mamady Doumbouya, urging the army to support him. There were savings on world aluminum markets on Monday (prices in London rose 10 years and futures in China rose to a peak since 2006), as political instability increases the possibility of changes in the bauxite shipments from key global supplier.
Aluminum has risen around 40% this year in London, as massive global stimulus measures sparked demand just as smelters in China, the largest producer, struggled to maintain production during a seasonal crisis. of energy and Beijing tried to curb the country’s carbon emissions. Bauxite is the raw material used to make alumina, which is transformed into aluminum, and Guinea accounts for more than half of Chinese imports.
The market “may be severely shaken” by the situation, said the founder of United Co. Rusal, Oleg Deripaska, in a Telegram message.
Prices on the London Metal Exchange rose as much as 1.8% to $ 2,775.50 a tonne, the highest since May 2011, and traded at $ 2,750 at 11:24 a.m. in Shanghai. In China, futures jumped to 3.4% to the highest since 2006, before mistaking gains to 1.8%.
“Investors are very worried as China buys a lot of bauxite in Guinea,” although there have been no reports of disruptions yet and the extent of any impact will depend on the evolution of the situation, Xiong said. Today, chief aluminum analyst at Beijing Antaike Information Development Co.
Aluminum Corp. of China, the largest producer and has a bauxite project in Guinea, said all of its operations are normal and it has extensive inventories of bauxite at its plants in China. Shares in Hong Kong rose to 10%.
Investors are also looking at ongoing production cuts in China’s Guangxi province, which is further tightening the market, Hui said.
The energy-consuming aluminum industry has been subjected to greater control as part of Beijing’s repression of pollution. China produces about 60% of the world’s total, with production concerns causing some of its largest smelters to pledge to secure supply and release metals from state reserves to facilitate sealing. The country has become increasingly dependent on imports, an infrequent development that has drained world supplies of normally abundant metals.
Aluminum, which is used from car parts to cans for beverages and appliances, was especially bad at the start of the pandemic, but now enjoys a strong resurgence as consumer demand and economic activity bounces. In the long run, the metal will benefit from its use in electric vehicles and renewable energy.
The rally is creating a huge windfall for producers who have been plagued by weak prices for years and who have often been pumping metals at a loss. But last year’s gains are adding more fuel to inflation concerns as manufacturers increasingly seek to pass on costs to consumers.