Affected by the domestic political turmoil in Guinea, international aluminum prices hit a new high since 2011 on Monday, and investors are worried about the supply prospects.
Related mining companies have gained funding. Norsk Hydro and the renewable energy company Norsk Hydro rose 5%, breaking through the 2008 high, and Rusal rose more than 14%, a record high.
According to CCTV News previously reported that a military coup took place in Guinea on the 5th local time, and fierce gun battles took place in the capital city of Conakry. Guinean special forces personnel stormed the presidential palace, occupied the national radio and television station, and then gave a television speech announcing the detention of President Alpha Conde, abolishing the constitution, disbanding the government, closing the border, establishing the National Unity and Development Commission and taking over power.
After the incident, the United Nations, the African Union (African Union), the Economic Community of West African States (ECOWAS) and other international organizations issued statements condemning any acts of taking over the government by force and demanding the immediate release of Conte. On September 6, Chinese Foreign Ministry spokesperson Wang Wenbin hosted a regular press conference. When answering questions from reporters, he said that he was paying close attention to the development of the situation in Guinea and he noted the relevant statements of the African Union and the Economic Community of West African States. China opposes the seizure of power by the coup and calls for the immediate release of President Conte. It calls on all parties to maintain calmness and restraint, proceed from the fundamental interests of the country and people of Guinea, resolve relevant issues through dialogue and consultation, and maintain domestic peace and stability.
Bauxite is the source of Guinea’s economy
Bauxite is mainly used to produce alumina, which is a key raw material for smelting aluminum ingots. International aluminum prices rose to a new high of US$2782/ton in the past decade during the Asian trading session on the 6th, and remained high and fluctuated. “Aluminum is currently one of the industrial metals with optimistic fundamentals. It has risen nearly 50% this year. Driven by strong global demand growth, news from Guinea may further increase the supply and demand gap through rising supply threats.” Saxo Bank The team released a report on Monday said.
Guinea, a West African country, is rich in mineral resources. Its bauxite reserves are the world’s second largest producer. The bauxite business is the key pillar of its economy and the main source of foreign exchange income. According to statistics from the country’s Ministry of Mines, 88 million tons of bauxite were produced last year. Good resource conditions have also attracted a large amount of overseas investment. According to media statistics, as of the first half of 2021, among the bauxite projects that have been put into operation in Guinea, Winners accounted for 35.91%, Alcoa accounted for 20.08%, Chinalco accounted for 15.15%, UAE Aluminum accounted for 13.57%, and RUSAL accounted for 6.75. %, Henan International accounted for 4.49%, Alufa accounted for 1.77%, State Power Investment Corporation accounted for 1.19%, and Double Aluminum United accounted for 1.09%.
What impact does it have on exports
Foreign media reported that Colonel Mamady Doumbouya, the person responsible for the coup, announced on Monday that the short curfew imposed on the mining area had been lifted. Guinea’s bauxite industry expert Bob Adam said in a statement that the coup is unlikely to have any major short-term impact on exports. Generally speaking, exports have been at a cyclical low point in September, and any government wants to ensure future mineral revenue and investment. Will not be affected.
The first financial reporter noticed that no local manufacturer has reported any significant impact on the production business. Chinalco’s listed company, Chinalco, previously announced that all its businesses, including those in Guinea, are operating normally. The Standard & Poor’s Global Ratings report stated that Chinalco should benefit from the strong global demand for industrial metals. The high aluminum price will support the profit margin from 2021 to 2022 to increase to 10%~11%, and the profit rate before interest, tax, depreciation and amortization will be 8.1% in 2020.
Many institutions continue to see the upward trend of long-term aluminum prices. Goldman Sachs predicts that due to the possible deterioration of global supply prospects, futures aluminum prices are expected to rise further. The Wall Street agency raised its target aluminum price for the next 12 months to US$3,200 per ton.
Carsten Menke, head of research at Julius Baer, believes that some environmental policy concerns on the supply side have increased market optimism. “Although it is believed that the current impact of carbon neutrality expectations on aluminum may be exaggerated, and prices are out of line with fundamentals, short-term price risks are still upward sloping.” He said.
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