Please ensure Javascript is enabled for purposes of website accessibility

Coup in Guinea Sends Aluminium Prices to 10-Year High

By The Daily Upside – Sep 6, 2021 at 8:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There have been plenty of drivers of economic volatility this year, but an elite military unit led by a former French Legionnaire is definitely a...

For more crisp and insightful business and economic news, subscribe to The Daily Upside newsletter. It's completely free and we guarantee you'll learn something new every day.

There have been plenty of drivers of economic volatility this year, but an elite military unit led by a former French Legionnaire is definitely a new one.

Aluminum markets were rattled Monday, with prices for the metal reaching a 10-year high in London, one day after a coup d'état occurred in the West African nation of Guinea, a key mineral market.

Metals 101

If a quarter of the world's bauxite supply were suddenly in jeopardy, your first question would likely be, "What's bauxite?" Well, it's a raw material that's refined into alumina, which can be smelted into aluminum, the versatile metal in everything from beer cans to airplanes.

As the world's second-largest bauxite producer, Guinea exported 82 million tons in 2020, more than any other country. In other words, instability in Guinea is bad news for the aluminum supply chain. So the market reaction was hardly surprising after the events of Sunday, when an elite military unit seized power, arrested the country's president, and suspended its constitution:

  • Aluminum prices on the London Metal Exchange rose 2% to $2,775 a ton, the highest since 2011, and futures in China jumped 3.4% to their highest level since 2006.
  • Aluminum has already climbed 40% this year on the back of a stimulus-sparked demand surge, leaving the metal's biggest producer, China, struggling to keep up.

Upside Pressure: Guinea supplied 55% of China's bauxite in the first seven months of the year, which has analysts fearing further price hikes ahead. "The increased uncertainty around the new political regime may disrupt global commodity export flows and also raises the likelihood of export contracts renegotiation, which may put upside pressure on alumina and aluminum prices," said JPMorgan analysts in an investment note.

G'Day For Some: Australia, the world's largest producer of bauxite, saw shares in its commodity sector rise Monday. Aptly named Aussie miner Alumina Limited, for example, was up 3%. On the other side of the coin, electric vehicle makers, already beset by chip shortages, are now looking at even higher production costs.

None

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.