Key Takeaways:
Aluminum Corporation of China (Chalco) will invest approximately $1 billion to construct a new alumina refinery in Guinea, adding 1.2 million tonnes of annual production capacity in a bid to secure upstream resources. The move comes as global aluminum markets grapple with supply chain disruptions and diverging prices between London and Shanghai.
Under an amended agreement with the Guinean government, Chalco's Hong Kong subsidiary will establish a project company to build and operate the facility. The terms grant Guinea the right to acquire up to a 35% equity interest in the project, which also includes the development of supporting port infrastructure. The project company will have an initial registered capital of approximately $68,200.
The investment provides Chalco with greater control over its alumina supply at a time of market volatility. LME aluminum has been trading firmly above $3,600 per tonne, with prices holding above all key moving averages amid a bullish alignment, according to SMM data. This strength is underpinned by a supply gap outside of China and falling LME inventories, which stood at 339,500 tonnes as of Wednesday, down 7,000 tonnes year-over-year. In contrast, the Shanghai Futures Exchange (SHFE) aluminum price has been weaker, trading around 24,440 yuan per tonne under pressure from high domestic inventories of 1.412 million tonnes.
By building capacity directly in Guinea, a major bauxite producer, Chalco is vertically integrating its supply chain to safeguard against geopolitical risks and shipping disruptions, such as those that have recently impacted other major producers. Aluminium Bahrain, for example, reported a 17% year-on-year drop in sales volume in its first quarter, citing regional shipping route issues. Chalco's investment ensures a stable, long-term supply of alumina, the primary feedstock for producing aluminum, thereby reducing its exposure to price fluctuations and logistical bottlenecks in the open market.
This article is for informational purposes only and does not constitute investment advice.
