Aluminum: Like a coup in a small African state, it risks sending a high price into orbit
A small African country risks giving a sensitive blow to the prices of products around the world. According to Bloomberg, aluminum prices soared to a new decade high after a military coup in Guinea fueled concerns about the supply of bauxite, a sedimentary rock with a high aluminum content. The military arrested the president of the country, but also promised new elections and not to touch the business world.
Aluminum prices rose in London and Shanghai. London Metal Exchange (LME) contracts rose nearly 2% to $ 2,775 on news of the military coup in the West African country on Sunday that could threaten the supply of bauxite.
According to UK-based commodity research firm Marex, Guinea is one of the largest exporters of bauxite in the world. The country extracts about a quarter of the world supply. So far, there are still no signs of supply disruptions.
Bauxite production 2017
Guinea has exported 82.4 million tons of bauxite to produce alumina which will eventually produce aluminum in 2020. Over the past half decade, exports from the country have increased. Some of the main buyers of bauxite are Australia and China.
The coup "may have a speculative impact on the price of aluminum, but it will have a greater impact on the price of alumina because it is more immediately exposed to the event," said Tom Price, head of commodities strategy at Liberum Capital. Ltd. "This is an event that will create a new security of supply risk."
Aluminum prices at the LME have risen by more than 40% in the last year and are at the highs of the new decade, not seen since 2011.
This speculative drive is part of a wider upward movement in aluminum prices, linked on the one hand to the increase in energy prices, and on the other to export restrictions from Russia and China, which are the main exporters.
Euro area aluminum prices
this speculation linked to political events in the Gambia can be short-term, or it can have deeper consequences, triggering another wave of increases in commodity prices and increasing stagflationary pressure. This, especially in the EU, can have very sensitive regressive effects, stifling an already not brilliant post covid-19 recovery.
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The article Aluminum: like a coup in a small African state risks sending a high price into orbit comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/alluminio-come-un-colpo-di-stato-in-un-piccolo-stato-africano-rischia-di-mandare-un-prezzo-alto-in-orbita/ on Tue, 07 Sep 2021 07:00:55 +0000.