Aluminium prices soar.

Author:Morgan, M.J.

Indonesia's ban on the export of raw bauxite, used to make aluminium, and the auto industry opting to use the metal instead of steel is very good news for African producers such as Guinea, Ghana and Sierra Leone as the global price of aluminium continues to break records. Report by MJ Morgan.

Aluminium prices have been rising this year, outperforming even nickel. They reached an 18-month high in September on the London Metal Exchange. Starting the year at around $1,750/tonne, they rose to above $2,ioo/tonne at their peak, fell back to the $1,900/tonne mark and are now a little off $2,ioo/tonne.

One of the major factors driving up prices has been Indonesian bauxite supplies--or, more accurately, their lack. Indonesia is the source of about 15% of global bauxite but its supplies have been off the market as the government has banned exports of bauxite (the unrefined ore from which aluminium is made). The aim is to force local beneficiation (processing) of unrefined bauxite into alumina (aluminium oxide) that is then subsequently smelted into aluminium.

Whilst supply is down, demand is up. One major reason for this is the automobile sector substituting lighter aluminium for steel (even though the former is around three times more expensive than the later), in order to meet much more stringent emissions targets in the US and EU markets. Chinese demand has also been resilient.

This prices spike is good news for Africa's bauxite exporters. West Africa is the source of 20% of the world's seaborne bauxite, from Guinea, Ghana and Sierra Leone.

In fact, Guinea alone is the world's second-biggest producer and is in a good position to benefit from rising demand from industry and the downward pressure on supply resulting from the absence of Indonesian supply. Fortunately, to date Ebola has had a limited impact on bauxite exports from Guinea (where there have been around 1,000 deaths from 2,000 cases to date), according to the International Aluminium Institute.

Anglo-African Minerals, which is planning the 2m tonne a year Kindia project (near to Rusal's operation) in Mali, does not expect any delay as a result of Ebola. A feasibility plan will be completed in February and production is scheduled to commence mid-2016. Alufer Mining also has plans for the region. The company has just completed a feasibility study for its $35001 Bel Air project in Guinea.

The world's largest producer of aluminium, Russia's United Company Rusal, sees world consumption...

To continue reading