The latest coup in bauxite-rich Guinea is reverberating across the market for aluminium, although for now it appears the global production chain is not under threat, analysts say.
Aluminium prices, already buoyed by a gradual economic recovery, topped $2,800 a tonne to reach a 13-year high on Wednesday after the coup.
Here’s why Guinea is such a big market factor:
A country of 13 million inhabitants, Guinea possesses the world’s largest reserves of bauxite, the reddish or grey rock that is extracted into aluminium oxide, which is then smelted into aluminium.
The West African state holds estimated bauxite reserves of 7.4 billion tonnes, or around one quarter of the global total, US Geological Survey (USGS) said last year.
Domestic and foreign firms last year produced 82 million tonnes of bauxite in Guinea.
They were surpassed only by Australia, which has the world’s second-largest reserves ahead of Vietnam and Brazil.
China — with around seven times less reserves than Guinea — imports around half its needs from there, according to raw materials consultancy CRU, increasingly upping purchases in recent years “following the deterioration in quantity and quality of domestic bauxite reserve.”
The mining sector in Guinea, which includes gold and diamonds, is crucial to the national economy, accounting for some 15 percent of GDP and around 80 percent of exports, according to the World Bank’s Macro Poverty Outlook.
Cause for concern?
Beyond potential short term supply wobbles, observers are confident the coup will not have lasting effects.
“It remains most likely that miners will be able to continue operating, even though we lack clarity on the direction of the country’s mining policy and who will manage the government’s portfolio,” notes Eric Humphery-Smith, Africa analyst at risk intelligence company Verisk Maplecroft.
In one of his first declarations after the weekend takeover, coup leader Lieutenant-Colonel Mamady Doumbouya sought to reassure business partners and foreign investors.
Guinea will “uphold all its undertakings (and) mining agreements” and “maritime borders will remain open for export activities,” he said on Monday.