Guinea coup may hit global bauxite supply market analysts said, as the West African country is the world’s second-biggest producer of the raw material that is converted to alumina and then aluminum and is the top supplier to China.
The coup began on Sunday (Sept. 5) when special forces detained long-serving President Alpha Condé, and then announced on state television that the government had been dissolved and borders would close until further notice.
Aluminium prices in London hit decade highs on Monday (Sept. 6) while futures in China climbed to the highest since 2006.
“Prices in London rose as much as 1.8% to $2,775/mt this morning [to the highest level since May 2011], while futures in China rose 3.4% to $3,405.64/mt, higher than previous highs in July 2008,” UK brokerage SP Angel said.
“Guinea’s coup is expected to add further supply pressures to the aluminum market, although new Chinese supply in the pipeline is anticipated to soften prices,” the brokerage added.
“Guinea is a major producer of bauxite, and accounts for more than half of China’s imports of the commodity. The detention of President Alpha Conde by the military puts bauxite shipments at risk” according to analysts at Lloyd’s List.
The market “can be seriously shaken” by the situation, United Co. Rusal founder Oleg Deripaska said in a Telegram post. Major Russian aluminum group Rusal, which has been operating in Guinea since 2001.
“The aluminum sector has seen the most volatility off the back of the news, with Guinea shipping about 25% of global bauxite (recall 1 mt of aluminum requires c2 mt of alumina, and alumina in turn requires c2.5 mt of bauxite). In turn, this has pushed up aluminum prices by about 1.1%, but will also be beneficial to alumina and bauxite prices” Berenberg analysts said in a note.
News of the coup did not have any immediate impact on Guinea’s bauxite operations, which are crucial to the country’s economy as its main foreign currency earner.
The country produced 88 million tonnes of bauxite last year, according to mines ministry statistics and
exported 44.7m tonnes in H1 2021 with 70% of it heading to China, according to research from brokers Arrow.
Societe Miniere de Boke (SMB) and Compagnie des Bauxites de Guinee (CBG) are Guinea’s top two bauxite producers. SMB is owned by a consortium including Singapore shipping company Winning International Group, Shandong Weiqiao – a subsidiary of the world’s top private sector aluminium producer China Hongqiao – and Guinea’s UMS International. CBG is 51% owned by consortium Halco Mining Inc and 49% owned by the Guinean government. Anglo-Australian mining giant Rio Tinto and Alcoa Corp each hold 45% of Halco, while Dadco Investments holds the rest.
Guinea’s other minerals include diamonds, iron ore and gold. The country also has mineral resources including cement, salt, graphite, limestone, manganese, nickel and uranium. Mining accounts for about 35% of GDP in Guinea.