Aluminium prices have hit a decade high after Alpha Conde, president of the Republic of Guinea, was detained by special forces in the capital, Conakry. Guinea is the world’s second-biggest producer of the raw material bauxite, used to produce aluminium.
On Monday, the price of aluminium futures on the London Metal Exchange rose as much as 1.8%, to $2,775.50 per metric ton. This is after prices had surged this year due to a jump in demand coinciding with production cuts within China, as part of attempts to curb carbon emissions from heavy industry.
Aluminium is a crucial component in a range of products, from beer cans and cars to smartphones and renewable energy systems. Unrest within Guinea is putting further strain on the market as it supplies more than half of the ore imported by China, the top global producer of the metal. In the first seven months of this year, Guinea supplied China with 55% of its bauxite supply, according to analysts at ING.
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Eric Humphery-Smith, an analyst at risk intelligence company Verisk Maplecroft, predicts that “operations will likely remain shuttered for the coming days and potentially weeks”.
“Miners now have little other option than to sit tight and await further clarity from the transitional authorities,” he said in a note to clients on Monday.
Guinea also holds some of the world’s highest-grade iron ore, which includes the giant Simandou deposit that has been the subject of a protracted legal battle. The removal of the long-tenured president from power may lead to numerous gold, iron ore, and bauxite projects in the country being subject to renegotiation. This could adversely impact the market for both metals, especially if turmoil in the country continues after the coup.
Shares in China Hongqiao, the world’s largest aluminium producer, which is part of a consortium developing part of the Simandou deposit, fell 4% in Hong Kong trading on Monday.
After the coup, the country’s borders were closed, and its constitution was declared invalid in the announcement read by army Colonel Mamady Doumbouya.
“The duty of a soldier is to save the country,” he said.
“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 the likelihood of export contracts renegotiation, which may put upside pressure on alumina and aluminium prices,” said analysts at JPMorgan.
Price recovery and the reinstatement of production lines will depend on whether a functional and amenable government comes into power in short order.