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Zinc boosted by output cuts caused by power crunch

Prices for zinc jumped to a fresh 14-year high on Thursday after soaring power prices triggered production cuts at major zinc producer Nyrstar NYR.BR.

Electricity prices have reached record highs in recent weeks, driven by power shortages in Asia and Europe, leading to a curtailment in the production of some metals and threatening a global economic recovery.

Belgium-based Nyrstar said it would cut production by up to 50% at its three European zinc smelters from Wednesday. The three smelters have a combined capacity of around 700,000 tons per annum, according to Commerzbank.

The cuts come at a time when inventories are low on the LME system. Total stocks of zinc in LME-registered warehouses MZNSTX-TOTAL fell 1,475 tonnes to 189,600 tonnes, the lowest since January.

“The energy crisis set the fire for the rally across the board, and low inventories of some metals such as copper and zinc also support the parabolic run,” said ING analyst Wenyu Yao.

“(Zinc) prices could stay elevated at least before the current power crisis dissipates,” she said in a note.

Benchmark zinc CMZN3 on the London Metal Exchange (LME) was up 3.7%% at $3,528 per tonne by 0954 GMT, its highest since July 2007. The metal, used to galvanise steel, was in its sixth straight session of gains.

The premium of LME cash zinc over the three-month contract jumped to $42 a tonne, its highest since November 2019, on concerns over immediately available supply. MZN0-3

MARKET BALANCE:
The global zinc market will see a surplus of 217,000 tonnes in 2021, and a smaller 44,000 tonnes next year, according to the International Lead and Zinc Study Group (ILZSG).

PRODUCER PRICES: China’s annual factory gate prices rose more quickly than expected in September, driven by soaring raw material prices, piling pressure on businesses already grappling with energy curbs and supply bottlenecks.

CHINA ECONOMY: China’s economic growth is likely to slow to 5.5% in 2022 from an expected 8.2% this year, a Reuters poll showed, but the central bank could remain cautious about monetary easing due to worries over high debt and property risks.

OTHER PRICES: Copper CMPB3 rose 2.1% to $9,859 a tonne, aluminium CMAL3 advanced 2.9% to $3,155, lead CMPB3 was up 1% at $2,267.50, tin CMSN3 rose 1.7% to $36,985, and nickel CMNI3 increased 2.2% to $19,330 a tonne.
Source: Reuters (Reporting by Zandi Shabalala; Additional reporting by Mai Nguyen in Hanoi; Editing by Jan Harvey )

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