China’s Bauxite Vulnerabilities: Aluminum Corp. of China Ltd.’s Concerns and Strategies to Mitigate Risks

In recent years, Guinea has become the largest bauxite exporter, surpassing Australia and Indonesia. This has made it a crucial supplier for China, which processes most of the country’s bauxite into alumina and aluminum metal. However, Aluminum Corp. of China Ltd. (Chalco) is expressing concerns about the risks to its supplies of bauxite from Guinea, which provided 70% of China’s bauxite imports last year.

The company acknowledges that its dependence on Guinea for raw materials puts it in a vulnerable position, as any disruptions in supply can have a significant impact on its operations. To mitigate these risks, Chalco plans to ensure supply continuity from its single mine in Guinea while also exploring opportunities to develop additional mines in the country’s north. The company also aims to collaborate on bauxite projects in other regions and enhance domestic supplies.

Despite rising net income last year by 60%, Chalco remains cautious due to uncertain global economic conditions and geopolitical risks impacting commodity markets. Bloomberg Intelligence analyst Michelle Leung warns that China may eventually rely on Guinea for 90% of its bauxite imports if policy changes or frequent strikes disrupt supply fluctuations at Chalco’s mine in the country. She suggests that Guinea could follow Indonesia’s lead by requiring foreign companies to establish refineries locally.

The challenges facing Chalco are not limited to those related to supply chain risks but also include insufficient demand and weak expectations persist in the domestic market setting. Despite these challenges, Chalco is committed to ensuring supply continuity from Guinea while exploring new opportunities for growth and diversification in other regions.

In conclusion, China’s reliance on Guinea as a supplier of bauxite poses significant risks for Aluminum Corp. of China Ltd., particularly given the country’s heavy dependence on the resource last year