This Morning in Metals: Aluminum prices reach 10-year high following Guinea coup

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This morning in metals news: Aluminum prices reach 10-year highs after a coup in Guinea threatens to disrupt global bauxite supply. In other news, steep commodity prices send China’s factory-gate inflation to a 13-year high. Also in the news, Hurricane Ida’s damage leaves more than 75% of U.S. Gulf of Mexico oil production offline.

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Aluminum prices reach 10-year high following Guinea coup

A special forces unit led by Col. Mamady Doumbouya claims to have seized control of Guinea following a coup Sunday in the West African nation. President Alpha Condé was detained and the government dissolved as Doumbouya cited “poverty and endemic corruption” as reasons for the takeover.

Aluminum prices soared following the coup, reaching a 10-year high, as the West African country contains the world’s largest bauxite reserves, a primary source of aluminum. The LME 3-month aluminum price currently sits at $2,793/mt. In spite of Doumbouya’s instruction for mining companies to continue operations, fears persist over the possibility of global supply disruptions.

As the world’s primary aluminum producer, China stands to see the largest impact should such political upheaval result in any interruptions to bauxite supply. From January through July, 55% of China’s bauxite imports came from Guinea. During that same period, Australia, the world’s largest bauxite producer, accounted for 31% of bauxite imports to China. While the country may become a necessary sourcing alternative, Australia and China have been mired in conflict following Australia’s calls for investigations into the origins of COVID-19. China responded to such calls with restrictions to a range of Australian imports.

In a rare contradiction to its usual policy of noninterference, a spokesperson for China’s Ministry of Foreign Affairs said on Monday, “China opposes coup attempts to seize power and calls for the immediate release of President Alpha Condé.”

Factory-gate inflation in China soars to 13-year high

Steep commodity prices have pushed China’s factory-gate inflation to a 13-year high for August, as reported by Reuters. According to the National Bureau of Statistics (NBS), the producer price index (PPI) climbed by 9.5% from the prior year, the fastest rate since August 2008, which reached 10.1%. The elevated costs of raw materials continue to add strain to the country’s manufacturers in spite of national efforts to curb commodity prices. In a separate report from the NBS, the consumer price index (CPI) rose by 0.8% year over year in August, beneath the government aim of about 3%.

Following Hurricane Ida, over 75% of U.S. Gulf of Mexico’s oil still offline

Damage from the category 4 Hurricane Ida, which made landfall on Aug. 29, still awaits repair. As of Wednesday, Reuters reports that upward of 75% of U.S. oil and gas output remains offline. The storm’s damage to offshore energy production has made it one of the worst, most costly hurricanes since Hurricane Katrina barreled through the Gulf in 2005.

Estimates place losses around 17.5 million barrels of oil to date, lowering overall U.S. production for the year by 30 million barrels as platforms remain shuttered for the time being. The Gulf of Mexico accounts for around 16% of the U.S. daily oil production.

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