Political turmoil in Guinea hits aluminum giant Rusal

A coup d’etat in Guinea this week rocked international aluminum markets and sent prices for the metal shooting to a 10-year high on the London Stock Exchange. The overthrow of President Alpha Condé is a major headache for Russian aluminum giant Rusal, which owns Guinea’s large Friguia alumina refinery. If the refinery is forced to halt operations, it would be a major financial blow to Rusal.

• Col. Mamady Doumbouya led a team of special forces last weekend in a coup in Guinea, one of the world’s poorest countries. President Condé was arrested and Doumbouya announced the suspension of the constitution, the dissolution of parliament and the closure of the borders. “We will no longer entrust politics to one man,” he said. “We will entrust it to the people.” He said power would pass into the hands of a National Committee for Unity and Development.
• Guinea is an important economic partner for Russia — and Rusal — because the country is the world’s third largest producer of bauxite, the ore that is refined into alumina and ultimately smelted into aluminum. Rusal owns three bauxite mines in Guinea, which account for 42 percent of the company’s total bauxite capacity.
• Under Condé, Russia enjoyed good relations with Guinea. Diplomatic ties were close and Condé could count on Russian support to stay in power. Condé had a closed-doors meeting with Russian President Vladimir Putin in 2019 and, the following year, Guinea changed its constitution and Condé was elected for another six years (a somewhat similar process to the constitutional amendments approved in a referendum in Russia last year).
• Before Condé came to power, Rusal had problems in Guinea. The company purchased Friguia for $19 million in 2006 under previous president Lansana Conté. Two years later, Guinea complained the purchase was unfair and that the refinery would need to be paid for. The regime took Rusal to court in 2009 and demanded a further $238 million. Subsequent claims took the total to $1 billion. It wasn’t until 2010 — on the eve of the elections that brought Condé to power — that Rusal managed to reach an agreement with the Guinean authorities.
• After this week’s coup, Rusal announced it was preparing to evacuate its staff from the country “in the event of any further escalation of political instability”. If Friguia stops work, the company could lose a big chunk of its aluminum production capacity — and is unlikely to get any compensation.

Why the world should сare: Rusal is one of the world’s leading producers of aluminum and alumina, selling most of its output abroad. The closure of Friguia — even if temporary — would lead to an even bigger leap in aluminum prices than the one seen this week.