Guinea supplied China with up to 70% of its bauxite last year (Getty)
China Aluminum Corporation Limited (Chalco), the world's largest aluminum producer, has raised the alarm about potential disruptions to supplies of bauxite (the natural ore from which most aluminum is made) from Guinea, raising the significant risks posed by heavy reliance on one country for its supply. The most important raw material for industry, according to Bloomberg in a recently published report.
According to Chalco's annual results statement, Guinea supplied a whopping 70% of China's bauxite imports last year, making the company highly vulnerable to any unrest in the West African country.
“The company’s bauxite mine in Guinea may face supply fluctuations due to local policy changes and frequent strikes,” Chalco stated in its report, underscoring the inherent volatility in the dynamics of its supply chain.
To mitigate these risks, Chalco has identified several strategies aimed at ensuring continuity of supply from its current mine in Guinea while exploring ways to develop additional mines in the northern regions of the country, according to Bloomberg.
In addition, the company plans to cooperate on bauxite projects in alternative locations and enhance local supplies to reduce dependence on imports.
China sees its dependence on Guinea rising to 90% regarding bauxite imports (European)
The rise of Guinea as the leading exporter of bauxite in the first decade of the 21st century, surpassing traditional heavyweights such as Australia and Indonesia, has strengthened its pivotal role in global aluminum production.
Bloomberg says that most of the bauxite found in Guinea finds its way to China, where it is processed and converted into alumina before being converted into aluminum metal. However, the dwindling domestic bauxite production in China and Indonesia halting exports to prioritize local processing have strengthened Guinea’s position as an important supplier.
Bloomberg Intelligence analyst Michelle Leung warned that China may see its dependence on Guinea escalate to 90% for bauxite imports.
Compared to the policies pursued by Indonesia, Leung said that Guinea may mandate foreign companies to establish refineries locally, which reflects the approach adopted by Indonesia.
Although Chalco reported a strong 60% increase in net income to 6.72 billion yuan last year, the company remains wary of global economic headwinds, coupled with rising geopolitical tensions.
According to Chalko, these factors contribute to creating a highly uncertain outlook for commodities, with the domestic market facing challenges such as low effective demand and tepid expectations.
Source: Bloomberg