Why has the price of aluminium skyrocketed around the world?

Northern Australia has huge and easily accessible deposits of of bauxite right by the sea (at Weipa) and only a short sail from Asia.  So it is already a major supplier.  It may soon become even more dominant as a  supplier.  It easily has the reserves to replace Guinea and buyers should see that

What happened this week was a huge spike in the price of aluminium, which goes into everything from cars and trucks to phones and beverage cans. The metal touched $3000 a tonne — the highest it’s been since the 2008 global financial crisis — before settling down a wee bit after a couple days. But it’s still almost 70% more expensive than this time last year.

Why has the cost soared?

Because of Guinea, a tiny country in West Africa. Earlier this month, a military junta ousted Guinean president Alpha Condé in a coup driven by frustration over a lack of social and economic reform during his tenure. (Ramming through a referendum to ignore term limits and extend his time in office didn’t win Condé any friends either.)

Guinea is one of the major producers of bauxite, the mineral that is the raw ingredient for the production of aluminium. With a country so dependent on mining producing a commodity the world is so reliant on, a military coup naturally introduced uncertainty into the market — and uncertainty often means volatility. Even though Guinea’s mines are making an effort to keep operations normal and production steady, prices can still rise because commodities are traded speculatively. This means traders are nervous about what could happen with this batch of colonels, or even the next government, whenever it’s formed.

Guinea’s travails have indirect effects. Any blip in the bauxite supply chain has potential to wreak havoc later on. This is especially true seeing that China, which turns much of Guinea’s rocks into shiny metal, has become a net importer of aluminium recently, so it doesn’t necessarily have the domestic back stock to keep up with industry demand.

Aluminium comes from an ore called bauxite. According to the US Geological Survey, bauxite is the “only raw material used in the production of alumina on a commercial scale”. In other words, if the world wants aluminium, the world needs bauxite. The process that turns bauxite into aluminium is called smelting, and it is fairly resource- as well as energy- and emissions-intensive. It’s a messy business.

While Australia was the world’s largest producer of bauxite last year, digging up 110 million tonnes, Guinea produced 82 million tonnes, or 22% of the world’s supply. For a country of just 13.6 million people, that is no small feat. More importantly, perhaps, it also has the world’s largest reserves of bauxite, with 7.4 billion tonnes. Guinea may not be to aluminium what the DRC is to cobalt, but it’s almost there.

What does this mean for the prices of goods that use aluminium?

Well it’s not good. Aluminium is everywhere these days. It’s used heavily in automobile production: Ford’s F-150 pick-up, the best-selling vehicle in the US, uses loads of it, which unfortunately got pricier thanks to former US president Donald Trump’s tariffs on imported aluminium. It’s in mobile phones. It’s in cans. The US uses it extensively in defence production. And the post-pandemic “greening” of the economy has led to increased aluminium demand due to its prevalence in electric car production and solar panels, as NPR’s Marketplace pointed out. 

Increased demand, combined with continued political uncertainty in Guinea, could keep aluminim prices sky high. If that happens, the prices of consumer goods will inevitably inch upward. The more volatile Guinea’s political situation is, the bigger the effect.

How long will this last? 

It depends on how long political instability in the country persists. Lately, consultations have begun to shift from military rule to a transitional government. But it could take weeks — or a whole lot longer — for a final decision to be made.

In the meantime, the leader of the coup, Colonel Mamady Doumbouya, rushed to assure big mining companies he wouldn’t do anything to disrupt operations, which might take some of the froth out of the market.

Bauxite is Guinea’s golden goose, so it’s not likely the new junta will do anything to jeopardise exports in the short term. But if political instability continues — or if the government decides to take a bigger bite of mining revenues, potentially even leading to closures — supply problems could creep into an already jittery market. And if you drive, talk, or eat leftovers, that is not what you want to hear.


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