Explosion in Guinea spurs rise in aluminium prices amid supply shortage fears

A massive fuel depot explosion on December 18 in the capital of Guinea, the world's third largest bauxite producer, stoked concerns about the shortage of material to make alumina, the substance used in producing aluminium. This led to a spike in bauxite prices by over 7% to an all-time high of $446 per tonne and aluminum prices by 2.5%.

While Chinese ports currently have inventory worth over two to three months, which also prompted some profit taking, there are expectations that China might reduce production due to the approaching winter. Besides, interest rate cuts by five Chinese banks indicates that money is expected to flow into the markets, providing support for various metals.

Shanghai's aluminium inventories decreased by 8.5% in just one week. With aluminium likely to end 2023 with a nearly 12% decrease and ongoing supply disruptions, accumulation calls are increasing, providing support for the metal.