Aluminium prices hit decade high on Guinea coup


Industrial metals updates

Aluminium prices hit their highest levels in a decade on Monday following news of a coup in Guinea, the world’s second-biggest producer of raw material bauxite.

The prices for the metal, used in beer cans, construction and cars, rose 1 per cent to hit $2,776 per tonne on the London Metal Exchange, the highest level since May 2011. Shares of aluminium producers in China and Europe also rose.

Guinean soldiers said on Sunday they had overthrown President Alpha Condé in an apparent military coup, raising concerns about the supply of bauxite needed to make aluminium.

Guinea supplies about 25 per cent of the world’s bauxite, mostly to China and Russia. The raw material is refined to make alumina, the starting point for aluminium production.

Shares in Russian aluminium producer Rusal rose 4 per cent in Moscow on Monday before edging back, while those of Aluminum Corporation of China were up 5 per cent on the back of higher aluminium prices. In Europe shares of Norsk Hydro rose 5 per cent in Oslo.

“The increased uncertainty around the new political regime in one of the world’s largest bauxite producing countries may disrupt global commodity export flows and also raises likelihood of export contracts renegotiation, which may put upside pressure on alumina and aluminium prices,” analysts at JPMorgan said.

Guinea is China’s largest source of bauxite, while Rusal owns three bauxite mines in the country, which accounted for 50 per cent of its total supplies last year.

In the first seven months of this year, Guinea supplied China with 55 per cent of its bauxite supply, according to analysts at ING. China in turn is the world’s largest producer of aluminium.

Australia is the largest producer of bauxite. Shares of miners of the commodity in the country rose on Monday, with Alumina Ltd up 3 per cent on the Australian Stock Exchange.

“We would expect more aggressive Chinese purchases of alumina over the coming weeks as a supply hedge,” analysts at BMO Capital Markets said.

Guinea also has some of the world’s highest-grade iron ore, including the giant Simandou deposit that has been the subject of a protracted legal battle.

BMO Capital Markets said gold and iron ore projects in the country could be subject to renegotiation.

Shares in China Hongqiao, the world’s largest aluminium producer which is part of a consortium developing part of the Simandou deposit, fell 4 per cent in Hong Kong trading on Monday.



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