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Shanghai zinc soars to 14-year high as power crisis hits output

Shanghai zinc prices surged 8% on Monday to a 14-year high on supply shortage worries as an energy crisis in Europe and China forced some companies to cut production.

The most-traded November zinc contract on the Shanghai Futures Exchange SZNcv1 advanced as much as 8% to 27,720 yuan ($4,306.76) a tonne, its highest since August 2007.

Three-month zinc on the London Metal Exchange CMZN3 rose 1.4% to $3,848 a tonne by 0601 GMT, after surging a record 20.4% last week to close at its highest since June 2007 on Friday.

Belgium-based Nyrstar NYR.BR said last week it would cut production by up to 50% at its three European zinc smelters, while Glencore GLEN.L, which also has three zinc smelters in Europe, said it was “adjusting production” to save energy costs.

In China, Yunnan and Guangxi continue to restrict zinc smelting output, but Chinese downstream consumers are practising a “wait-and-see” approach as prices of the metal surged, Huatai Futures said in a report.

“The price support is relatively strong, but it is necessary to beware of the downside risks caused by weak consumption,” it said.

Citi analysts in a report last week upgraded their average price forecast for LME zinc in October-December to $3,500 a tonne from $2,900 previously.

FUNDAMENTALS

  • LME copper CMCU3 climbed as much as 1.7% to $10,452.50 a tonne, its highest since May 18 and only 2.7% below its record high level of $10,747.50 a tonne. ShFE copper SCFcv1 climbed to a level unseen since May 13 at 76,700 yuan a tonne.
  • LME on-warrant copper stocks MCUSTX-TOTAL dropped to their lowest since 1998 at 14,150 tonnes, while ShFE copper inventories CU-STX-SGH were at their lowest since June 2009 at 41,668 tonnes.
  • ShFE aluminium SAFcv1 jumped to a level unseen since May 2006 at 24,700 yuan a tonne and LME aluminium CMAL3 advanced 0.8% to $3,196.50 a tonne, having hit its highest since July 2008 at $3,215 a tonne in the previous session.
  • China’s September aluminium output declined for a fifth consecutive month due to electricity shortages.

Source: Reuters (Reporting by Mai Nguyen in Hanoi; Editing by Rashmi Aich and Subhranshu Sahu)

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