Guinea Coup: Impact on Aluminum and Bauxite

 Alert - Coup in Guinea raises concerns on aluminum feedstock supply. China production cuts may impact aluminum prices.

• Aluminum prices jumped to 10-year highs owing to feedstock (bauxite) supply concerns. Guinea accounts for nearly 25 percent of the global bauxite supply.

• Aluminum production cuts in China, between January and August 2021, exceeded 2 million tons. Further capacity shutdown is expected during Q4 2021, owing to pressure from government agencies to cut electricity consumption and emissions.

• No significant impact on the category owing to the earthquake in Mexico.

Industries Impacted- Transportation, Automotive, Packaging, Construction

Category Impact Assessment

Supply

• No significant impact on aluminum supply in the short term (2–3 months), owing to the coup in Guinea.

Price

• Prices may remain elevated owing to the existing global supply crunch on account of the production cuts in China, high freight rates, and speculations surrounding possible feedstock supply disruptions.

Raw Material Availability

• No significant impact in the short term (2–3 months).

Proactive Alert (Bauxite)

Alert- Coup in Guinea raises concerns on Bauxite supply.

• Bauxite prices spiked to an 18-month high, as buyers in China and overseas are concerned about the stability of bauxite supplies post-coup.

• After Australia, Guinea is the second-largest bauxite producer globally, accounting for 25 percent of global bauxite production. Guinea is also the largest bauxite ore exporter (60 percent) to China.

• Global bauxite supplies declined by 1.30 percent year-on-year to 90 million tonnes in January–March 2021, with Australia’s output falling by 2.00 percent and Guinea's output growing by 1.00 percent.

• No significant impact on the category owing to the earthquake in Mexico.

Industries Impacted - Aluminum, Refractories, Transportation, Automotive, Packaging, Construction

Category Impact Assessment

Supply

• No significant impact on bauxite supply, as the new government has lifted the ban on bauxite operations. Royalty from bauxite mining provides major revenue for the government. However, the lead time can increase, as producers are skeptical about sending vessels to Guinea.

Price

• Prices are likely to remain supported on account of high freight rates and speculations surrounding possible feedstock supply disruptions.

Raw Material Availability

• No significant impact in the short term (2–3 months). Australia followed by Indonesia can ensure supply continuity of bauxite ore in case of supply disruptions