Fuel depot blast in Guinea may disrupt bauxite supply to China; domestic alumina purchase grows out of fear

The recent fuel depot explosion in Guinea has raised fears of a bauxite shortage, which may affect alumina production in China. China secures the lion's share of bauxite from Guinea, which they refine into alumina and used for aluminium smelting. The fear of bauxite shortage and alumina production cut as a result has increased the aluminium ore purcase enthusiasm, driving the price hike.

Although Guinean authorities have authorised a gradual resumption of gasoline distribution after a five-day ban following the blast, it is limited to 25 litres for vehicles and 5 litres for motorcycles, said the government in an open statement. Sales of fuel in cans are still prohibited. All this will impact the transportation from Guinea to China.

The possibility of a bauxite shortage in China has raised the buying enthusiasm for alumina for future use. Thus, the domestic alumina spot price has begun soaring this week, exceeding RMB 3,000 per tonne. On December 22, the alumina spot price rose by RMB 6 per tonne to RMB 3,004 per tonne, which further grew over the weekend by RMB 8 per tonne to reach RMB 3,012 per tonne as of December 25. On December 26, the price continued to surge by RMB 14 per tonne to settle at RMB 3,026 per tonne.

Due to the fear of a disrupted supply chain, primary aluminium consumption has also increased in China, driving the A00 aluminium ingot price hike. On December 26, China's domestic primary aluminium ingot price increased by RMB 130 per tonne to stand at RMB 19,200 per tonne.

The explosion at Guinea's fuel depot occurred on December 17, leaving 23 dead and 285 injured and halted businesses across the country. Guinea is one of the world's biggest producers and suppliers of bauxite, a core raw material used to produce primary aluminium.

The West African nation also has the world's largest untapped deposit of iron ore, which companies like Rio Tinto are eyeing to explore.