International aluminium prices hit their highest level since 2011 on Monday amid political unrest in Guinea as investors fretted about the supply outlook.
Related mining companies received funding, with Norsk Hydro, a Norwegian aluminium and renewable energy company, up 5 per cent to break 2008 highs, and Rusal up more than 14 per cent to a record high.
According to CCTV news earlier reported, guinea on The 5th local time military coup, the capital of Conakry several fierce gun battles. Special forces in Guinea have stormed the presidential palace and occupied the national radio and television station. In a televised address, they announced the detention of President Alpha Conde, the annulment of the constitution, the dissolution of the government, the closure of borders, the formation of a National Unity and Development Council and the takeover of power.
After the incident, the United Nations, the African Union (AU), the Economic Community of West African States (ECOWAS) and other international organizations issued a statement condemning any attempt to take over the government by force and demanding The immediate release of Conte. On September 6, Chinese Foreign Ministry spokesperson Wang Wenbin held a regular press conference and said that China is closely following the situation in Guinea and has taken note of relevant statements made by the African Union and the Economic Community of West African States (ECOWAS). China opposes the coup attempt to seize power and calls for the immediate release of President Conte. We call on all parties to remain calm and exercise restraint, bear in mind the fundamental interests of guinea and its people, resolve relevant issues through dialogue and consultation and safeguard its domestic peace and stability.
Bauxite is the source of Guinea's economy
Bauxite, which is used to produce alumina and is a key raw material for smelting aluminum ingots, rose to a 10-year high of $2,782 a tonne in Asian trading Friday and remained volatile. "Aluminium is one of the most fundamentally positive industrial metals, up almost 50 per cent this year. Driven by strong global demand growth, the news from Guinea is likely to further increase the gap through rising supply threats." Saxo Bank's team said in a report released Monday.
The mineral-rich West African nation of Guinea has the world's largest bauxite reserves and is the world's second largest producer. The bauxite business is a key pillar of its economy and a major foreign exchange earner. Last year, 88 million tons of bauxite were produced, according to the country's mining ministry. Good resource conditions also attract a large number of overseas investment. Media statistics show that as of the first half of 2021, among the bauxite projects already in operation in Guinea, Winning Alliance accounts for 35.91%, Alcoa for 20.08%, Chinalco for 15.15%, Emirates Aluminum for 13.57%, Rusal for 6.75%, Henan International for 4.49%, Arufa for 1.77%, State Power Corporation for 1.19%. Double aluminum union accounted for 1.09%.
What impact will it have on exports
Col. Mamady Doumbouya, the leader of the coup, announced Monday that a brief curfew at the mine had been lifted, foreign media reported. 'The coup is unlikely to have any major short-term impact on exports, which are typically at their lowest point in the cycle in September, and any government would want to ensure that future mine earnings and investment are not affected,' wrote Bob Adam, an expert on Guinea's bauxite industry.
China Business News noted that no local producers have reported any major impact on their production operations. Chinalco, the listed unit of China's largest aluminum smelter, said earlier that all its operations, including those in Guinea, were operating normally. The S&P Global Ratings report said Chinalco should benefit from strong global demand for industrial metals. High aluminium prices will support margins of 10%-11% in 2021-2022 and 8.1% before interest, tax, depreciation and amortisation in 2020.
Many institutions continue to see more short-term upward trend in aluminum prices. Goldman sachs expects futures prices to rise further as the outlook for global supply is likely to worsen. The Wall Street firm raised its target price for aluminium futures over the next 12 months to $3,200 a tonne.
Carsten Menke, head of research at Julius Baer, cited supply-side concerns caused by some environmental policies as adding to the optimism. "While the impact of current carbon neutrality expectations on aluminium may be overstated and prices are out of step with fundamentals, near-term price risks remain skewed upwards." He said.
