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Home >Markets >Commodities >Aluminum hits decade high after Guinea coup imperils bauxite supplies

Aluminum prices rose to their highest level in 10 years Monday after a military coup in mineral-rich Guinea threatened to snarl the lightweight metal’s supply chain.

Three-month aluminum forward contracts on the London Metal Exchange rose 0.9% to $2,757 a metric ton, their highest level since early 2011.

Shares of mining companies and aluminum producers also jumped. Hong Kong-listed shares of Russia’s United Co. Rusal PLC rose over 14% by the close of trading Monday, while Aluminum Corporation of China Ltd. rose over 5%. Australian bauxite miner South32 Ltd. rose 2.1% in Sydney.

A faction of Guinea’s military on Sunday said they had suspended the country’s constitution and detained President Alpha Condé. The West African nation is a major global supplier of bauxite—crucial for the manufacturing of aluminum—and iron ore.

Guinea exported 82.4 million tons of bauxite in 2020, making it the world’ largest exporter, according to metal’s brokerage Marex. Almost all bauxite is used to make alumina, which itself is used primarily to make aluminum.

The army reopened the country’s land and air borders on Monday after closing them in the immediate aftermath of the coup. Any closure of the border would threaten to snarl the global bauxite supply chain, said John Meyer, a mining analyst at SP Angel.

“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," Mr. Meyer wrote in a note to clients.

The coup could pose problems for Chinese aluminum makers. China is the main destination for Guinea’s bauxite and Chinese companies have been crucial for the development of the nation’s bauxite reserves, according to Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank of Australia. Guinea accounts for more than half of China’s bauxite imports, he said.

Australian bauxite miners, on the other hand, may benefit, according to Mr. Dhar. Australia and Guinea compete for Chinese bauxite imports, and Australian companies could step in if Guinea’s supplies are disrupted, he said in a research note.

“If the political instability in Guinea disrupts its bauxite exports, we expect bauxite prices to lift," he wrote. “Australia stands to benefit the most given its position as the world’s second largest bauxite exporter."

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