What is the impact of Guinea's coup on Chinese aluminum enterprises
In response to the coup in Guinea and the detention of President conte, the South African government issued a statement on the 6th, publicly expressing its concern about the domestic political and security situation in the country, and calling on the party involved in the coup to exercise restraint and release Conte immediately. The day before, there was a coup in Guinea, a West African country. Although the military government has urged domestic mining companies to continue their operations and promised to abide by the mining agreements signed with foreign countries, the "psychological panic" in the industry has led to fierce volatility in the stock prices of relevant industries due to the important position of Guinean bauxite in the global aluminum industry, and it is difficult to avoid fluctuations in the bulk market in the short term.
Or trigger the "Butterfly Effect"?
According to the kalenews news network of Guinea on the 6th, mamadi dunbuya, leader of the coup army, said that he suggested that mining companies should continue production, remain open to the export of mineral products, and promised their partners that they would fulfill their obligations according to the mining agreement.
Reuters reported on the 7th that the coup in Guinea triggered international concerns about the possible interruption of bauxite supply. On the 7th day, Chinalco's share price closed up 8.14%, while Alcoa fell slightly by 0.84%. Affected by the improvement of the global epidemic and the acceleration of demand growth, before the coup in Guinea, the global aluminum price rose by about 38% on the London Metal Exchange this year.
On the price fluctuation of aluminum industry caused by the coup in Guinea, Bloomberg said on the 6th that the disturbance of any major mining production area in the world may trigger a "Butterfly Effect". According to the Wall Street Journal on the 7th, Guinea exported 82.4 million tons of bauxite in 2020, becoming the world's largest exporter of bauxite, of which 52.67 million tons were exported to China, accounting for 63.96% of the total export volume. Since 2017, Guinea has surpassed Australia to become the largest bauxite supplier in China. According to China's customs data, China's imports of bauxite from Guinea accounted for 47.2% of its imports in 2020. In the first half of 2021, China imported 55.1272 million tons of bauxite, and Guinea continued to maintain its position as the largest import source country.
Many media are worried that China, as the main importer of bauxite in Guinea, will be affected. In this regard, he Wenping, a researcher at the Institute of West Asia and Africa of the Chinese Academy of Social Sciences, said in an interview with the global times on the 7th that the coup was just a game generated by the Guinean regime itself, which was neither aimed at foreign capital, equity nor the so-called nationalist behavior. In fact, the development of these aluminum products has not been greatly affected.
Will Australia benefit?
According to the Wall Street Journal, vivak, head of mining and energy commodity research department of the Federal Bank of Australia, said that Australia and Guinea are competitive in exporting bauxite to China. If Guinea's supply is blocked, Australian companies may fill the gap. Australian bauxite miners may benefit from it, "given Australia's status as the world's second-largest exporter of bauxite, Australia will benefit the most". According to Australia's Sydney Morning Herald on the 6th, Rio Tinto, an Australian mining giant, said it was "monitoring the situation in Guinea to assess any potential impact". The newspaper commented that at a time of deteriorating diplomatic tensions between Canberra and Beijing, the weakening of Guinea's mineral supply and even whether Australia can further affect China's steel industry has become a more noteworthy focus.
According to the data, Australia is the second largest source of bauxite imported by China. In 2020, China imported 37 million tons of Australian bauxite, accounting for 33.2% of the total import. However, in terms of the proportion of imports, Australian mines have decreased for three consecutive years. It is not easy for Australia to seize the Chinese market. Its main competitor is Indonesia. As a traditional exporter of bauxite, Indonesia's bauxite is mostly low-temperature ore, with good quality and low alumina processing cost.
On the argument that higher bauxite prices will benefit Australia the most, he Wenping retorted that the premise to achieve this is that guinea cannot continue mining because of the coup, but this is only a prediction and may not become a reality. If this premise does not exist, let alone does Australia benefit? Secondly, although China Australia relations have been cold in recent years, they will not go downhill all the time. Australia also needs to export bauxite. For them, market buyers are also very important. Naturally, Australia will not "shut out" such a huge import market as China. In addition, the bauxite import object is not an option for Australia. Brazil, Jamaica, Vietnam, Indonesia and other countries are also important bauxite exporters.
Chinese mining enterprises operate normally
The major market concerns caused by the coup not only come from bauxite, but also Guinea is a gathering place of various minerals. Guinea has the largest undeveloped iron ore reserves in the world - Simandou project. Simandou project is divided into north section and south section. On June 10, 2020, the "win alliance" jointly built by Singapore Weili international, Yantai Port Group, Shandong Weiqiao venture group and Guinea United Mining Supply Group officially signed an agreement with the Guinean government to obtain the mining rights of two blocks in the north section of Simandou with us $14 billion. The mining right in the south section is 45.05% owned by Rio Tinto, the world's largest mining company, 39.95% owned by the Chinese consortium led by Chinalco and China Baowu, and 15% owned by the Guinean government.
Adam, a Guinean bauxite expert, said that "the coup is unlikely to have a significant short-term impact on exports". He also predicted that "any new government will ensure that it will not destroy future profits and investment". At present, Chinalco spokesman said that its bauxite industry in Guinea operates normally. Singapore top said that its two bauxite mines operating in Guinea were stable and continued to operate after "minimal interference". Guy, chairman of Guinean mining company, said: "no matter who is in power, they hope that the project can be implemented because it is good for the country." he also said that the company's mineral development projects have obtained political risk insurance through the Multilateral Investment Guarantee Agency of the world bank.
He Wenping said that in addition to China, Singapore, Australia and other countries also have a lot of enterprise projects in Guinea. Such international joint ventures often "prosper and lose", which is also an irrefutable truth for Guinea itself. Even if the new regime comes to power, Guinea's mineral resources development still needs to rely on these enterprises
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