Points de vues

How a coup in Guinea impacts China and the energy transition


The coup d’etat in the West African country of Guinea earlier this month may not have been at the top of every investor’s list of concerns. Political uncertainty in Guinea is having ramifications though. Aluminium prices were up over 7% in the days after the coup. That is a move felt as far away as China, which imports more than half of its supply of bauxite – the raw material to produce aluminium – from Guinea.  

It remains unclear how long the transitional government will be in place. It has been consulting with various stakeholders, including business leaders. The Economic Community of West African States (ECOWAS) has imposed sanctions on the junta leaders and called for elections within six months. The hope is that stability is quickly restored, not least given the potential impact on individuals and livelihoods. 

There is a longer term issue though, which could undermine the “net zero” emissions targets that most of the world’s largest economies are aiming for by the middle of the century.

We recently published a research paper looking at the winners and losers of energy transition in emerging markets. As use of fossil fuels is phased out, demand for base metals, key inputs to renewable energy equipment and batteries, is already accelerating. Supply of these metals is equally as important, and this is why events in Guinea should be a warning to us all.

Why aluminium prices have rallied

The spot LME aluminium price rallied after news of the coup broke, amid fears the there could be a negative impact on the country’s bauxite exports. It has increased by 44% so far this year, as at 20 September 2021. 

As the chart below illustrates, Guinea accounts for close to 60% of global bauxite exports. The unexpected change in leadership brings uncertainty over future policies in the country. With aluminium exports accounting for in excess of 20% of GDP, the political upheaval raises question marks over existing contractual agreements and hence the global supply outlook.

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In China there is another strand to this story. With the government setting its ambitious goal of reaching net zero carbon emissions by 2060, it has encouraged state-controlled companies in particular to reduce emissions. As a result, aluminium in China is increasingly only produced at smelting facilities which can draw on green energy, as opposed to fossil fuels, namely coal. In essence, there has been a double whammy of bauxite supply issues and production constraints in China, which can be viewed as an energy transition issue.

Aluminium is an input to an array of clean energy technology, from wind and solar power technology through to carbon capture and storage, and electric motors. This has buoyed the demand outlook significantly, and consequently the risk of supply disruption has pushed the equilibrium price of aluminium higher.   

Why supply issues bear close monitoring

As we discussed in our recent research paper, there are issues of supply concentration facing a number of metals seen as key to the energy transition, and meeting net zero goals globally. Aluminium is one, but as these next charts show, copper, chromium and manganese are some of the others where global supply is dominated by a handful of emerging market countries. These are countries where political leadership and policy can be less stable. 

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Take copper for example, which is a key element to electric vehicles, among many other clean energy technologies. More than 65% of global copper exports (copper ores and articles combined) come from Chile and Peru.

Peru recently elected leftist Pedro Castillo as president, with plans to extract greater contributions to the public coffers from the mining sector. The policy details are yet to be published but there is a risk that higher taxes and royalties could ultimately be passed on to consumers via higher copper prices; or worse lead to cuts in capital investment needed to secure future supplies, which would also put upward pressure on prices.

In Chile, voters approved a convention to write a new constitution earlier this year. Its composition suggests that mining companies could well face greater tax and regulatory burdens in the future, and this is likely to be a hot topic ahead of the November general election. While supply in both countries does not seem to be under threat, higher taxes and regulation could well add to upward price pressure.

The supply of chromium, which is used in nuclear power, LEDs and carbon capture among other technologies, is even more concentrated. Nearly 75% of global chromium exports come from South Africa. The country experienced major social unrest in July and although the impact on chromium exports was limited, the event emphasises the risks.

Meanwhile manganese, an input to electric vehicles, wind power and carbon capture technologies, is another highly constrained supply chain. Almost 80% of global exports come from South Africa and Gabon combined.

These are some prominent examples, but there are other metals, crucial to the global energy transition, which are concentrated in terms of their supply. These range from cobalt through to lithium and nickel.

Energy transition and emerging markets inextricably linked

Given the importance of new energy technologies to reaching net zero emissions targets, the supply of many industrial metals is paramount. If existing supply or production is constrained, this is highly likely to have implications for energy transition.

With emerging markets accounting for large swathes of global metals exports, the security of supply is equally as important as the growing demand story. The events in Guinea underline one of the major risks faced by those nations seeking to decarbonise their economies over the coming decades. 


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  • Points de vues
  • matières premières
  • Andrew Rymer
  • David Rees
  • marchés émergents
  • Chine
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