The coup in Guinea accelerates the ‘rally’ that aluminum is experiencing

Coup Guinea Aluminum Market World

The aluminum market has experienced a real black swan this weekend. In Guinea there has been a coup that has deposed President Alpha Conde, an unexpected event that has made aluminum investors nervous about the possibility that instability could lead to a deterioration in production, in the country that has the most bauxite. produces all over the world.

It is a key component of aluminum alloy, so the threat of mine closures in the country can be a serious supply problem.

“Guinea exported 83 million tons of bauxite in 2020 and accounted for around 48% of all maritime trade in the metal in the year,” they explain from Citi, adding how “26% of the bauxite used for world production aluminum comes from Guinea.”

Although for the moment, the military that has taken control in the country have urged the bauxite mines not to stop their operations, some producers are showing signs of nervousness, with United Rusal communicating that if the situation in the country worsens, they may be forced to evacuate their employees from the region.

“Although the impact of political events on the mining and export of bauxite is not clear, it is most likely that the uncertainty will end up translating into some short-term supply problems,” they say from Citi.

Following the news of the coup, 3-month futures contracts on the London Metal Exchange on aluminum closed on Monday with a rise of more than 1.6%, pushing prices to hit new unseen highs since 2011.

The metal had already been experiencing a bullish rally that began in May 2020; At that time, prices were around $1,462 per ton in London, and the rise since then is 89.7%, to $2,773 where it is currently trading.

And the fact is that the coup d’état is an upward factor for aluminum prices that have been added to those that have been spurring them for months.

Environmental controls for mines that extract the elements from which aluminum is made are becoming stronger, and they are increasing costs for producers, something that is being passed on to metal prices.

In addition, the aluminum industry, with China as the main producer, with almost 60% of the total, according to Bloomberg data, is also dealing with the slowdown in production in the Asian giant. Beijing’s campaign to reduce pollution has paralyzed many factories in recent months, while demand has skyrocketed after the paralysis caused by the pandemic in 2020. Thus, this is another market that is suffering from bottlenecks.