Aluminium rises to 13-year high

Metal hits $3,000 as supply tightens and Guinea uncertainty persists

The price of aluminium – previously considered a precious metal of even more value than gold because of the difficulties in extracting it from other elements – rose above $3,000 per tonne for the first time since 2008 in London on Monday.

The rocketing price rise came as a result of Chinese authorities continuing to limit production and as political uncertainty persisted in the West African nation of Guinea – a leading producer of bauxite, which is first processed into alumina and then into aluminium.

China

The most-traded October aluminium contract on the Shanghai Futures Exchange also reached a 13-year high, topping 23,770 ($3,683) per tonne. 

Recent months have seen the Chinese authorities limit the production of aluminium. This is partly due to power shortages, but is primarily a consequence of Beijing demanding strict adherence to its new energy usage regulations, which are aimed at reducing the nation’s carbon emissions. 

According to Antaike, a state-backed think tank, around two million tonnes’ worth of aluminium capacity annually has been shut down in China thus far in 2021. 

Limits on domestic output have triggered a rise in aluminium imports into China, prompting a shift in storage from Europe and North America to Asia, and consequently increasing the price of the metal in Western countries.   

Guinea

Not only did this shift occur during a time of high shipping costs, but it also coincided with severe political instability in one of the most important countries involved in the aluminium supply chain. 

Guinea, which accounts for around a quarter of global bauxite production, has been in the grip of heightened political tensions for more than a week after an elite special forces unit deposed President Alpha Condé, imposed a curfew and closed the country’s borders. 

While the overthrow of Condé – Guinea’s first freely elected leader – was universally condemned, leading mining firms and buisness leaders voiced their concerns.

To allay their concerns, the coup’s leader, Colonel Mamady Doumbouya, quickly announced that the curfew would not apply to bauxite mines and that mining shipping would be exempt from the closed-border decree. 

Although these policies certainly helped investor sentiment, the uncertainty caused by the coup has continued to weigh heavily, and has continued to affect prices. 

By mid-afternoon trading today, the price of spot aluminium stood at $2,905 per tonne, having reached as high as $3,006 per tonne in the early morning.

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