LONDON--London Metal Exchange aluminum prices jumped over 3% to an over two-week high of $2,817 a metric ton Tuesday driven primarily by supply concerns as tensions escalate in Guinea, analysts and traders said.
Martial law in Guinea - a leading bauxite producer - and the bullish tone across the whole base metals complex are helping to boost aluminum prices, said an LME trader, adding that further rises are expected in the near term.
Four tons of bauxite make two tons of alumina, which in turn is smelted to produce one ton of aluminum.
Tuesday, Guinean President Lansana Conte instituted martial law until Feb. 23 after days of deadly protests. Under Guinean law, the emergency declaration prohibits all processions, demonstrations or gatherings and institutes a strict curfew.
The violence started Saturday following Conte's appointment of a close ally from his Cabinet as prime minister, a move the opposition said sidestepped a power-sharing agreement.
Production at Rusal's Friguia alumina refinery has been cut as a result of the violence, according to the company Tuesday. Meanwhile, Rio Tinto PLC said it has evacuated 16 of its staff from the country.
"Disruptions to bauxite supply are seen tightening the alumina market and could prompt a spike in aluminum prices," said Robin Bhar of UBS.
In addition, market speculation of a possible takeover of U.S. aluminum giant Alcoa Inc. by Rio Tinto PLC or BHP Billiton was another supportive factor for prices, the LME trader said.
Moreover, a drawdown in LME aluminum inventories by 2,175 metric tons to 756,125 tons boosted prices.
Aluminum's rise has helped lift the entire base metals complex as three-month copper jumped to $5,644 at 1442 GMT, up over 3% from Monday and nickel prices jumped to $36,175/ton, up nearly 4% from Monday.
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