Aluminum hits a decade high after Guinea coup threatens bauxite supplies

The three-month aluminum futures contract on the London Metal Exchange rose 0.9% to $2,757 per metric ton, the highest level since early 2011.

Shares of mining companies and aluminum producers also jumped. Hong Kong-listed shares of Russia’s United Company Rusal Plc were up more than 14% at the close of trading on Monday, while Aluminum Corporation of China Ltd was up more than 5%. Australian bauxite miner South32 Ltd rose 2.1% in Sydney.

A faction of Guinea’s military said on Sunday they had suspended the country’s constitution and detained President Alpha Condé. The West African country is a major global supplier of bauxite – important for the manufacture of aluminum and iron ore.

According to metals brokerage Marex, Guinea exported 82.4 million tonnes of bauxite in 2020, making it the world’s largest exporter. Almost all bauxite is used to make alumina, which itself is primarily used to make aluminum.

They reopened on Monday after the military closed the country’s land and air borders shortly after the coup. SP Angel mining analyst John Mayer said any closure of the border would threaten the global bauxite supply chain.

“The Guinea coup is expected to add further supply pressure to the aluminum market, although new sugar supplies in the pipeline are expected to soften prices,” Mr Meyer wrote in a note to clients.

The coup could spell problems for Chinese aluminum manufacturers. According to Vivek Dhar, Director of Mining and Energy Commodities Research at the Commonwealth Bank of Australia, China is the main destination for Guinea’s bauxite and Chinese companies have been instrumental to the development of the country’s bauxite reserves. He said that Guinea contributes to more than half of China’s bauxite imports.

On the other hand, Australian bauxite miners could benefit, according to Mr. Dhar. Australia and Guinea compete for Chinese bauxite imports, and if Guinea supplies are disrupted, Australian companies can step in, they said in a research note.

“If political instability in Guinea hinders its bauxite exports, we expect bauxite prices to rise,” he wrote. “Australia will benefit the most, given its position as the world’s second largest bauxite exporter.”