Industrial metals continue to experience mixed fortunes with a noticeably gab emerging in the performance between copper and aluminum, the two bell weather metals in this sector. While copper remains stuck in a range, aluminum has continued to surge higher with the latest move higher being driven by the risk of supply disruptions of Bauxite, a key component in the production of aluminum.
Aluminum, one of the metals with the most bullish fundamentals, trades up 40% year-to-date and at $2790/tons on the London Metal Exchange, it has reached the highest price in 13 years. Already benefiting from a robust long-term outlook due to its role in the clean-energy transition, and China’s crackdown on emissions in its energy-intensive industries such as aluminum, nickel and steel, the latest jump has been driven by political unrest in Guinea, a key source of supply of bauxite, a feedstock used to make alumina, which is further processed into aluminum.
Guinea, sometimes called the Saudi Arabia of bauxite holds the world’s largest reserve with China, the biggest producer of aluminum sourcing more than half of its bauxite from Guinea. The latest supply worry adding upside pressure to a metal already driven by the prospects for strong demand increasing the visible deficit in China and the West.
Having tracked each other closely during the early parts of 2020, the noticeable slowdown in China during the past few months arrested the rally in copper while aluminum continued higher on the mentioned tight supply concerns.