LONDON - Zinc and aluminium prices stormed to fresh peaks on Wednesday as a power crisis sparked cuts in smelter output.
Zinc touched a near 14-year high in Shanghai while in London they jumped the strongest in over three-and-a-half years after Nyrstar said it will cut production by up to 50% at its three European zinc smelters due to the soaring price of electricity.
"The cost burden of carbon emitted by the electricity sector which is passed on to industrial and domestic customers, mean it is no longer economically feasible to operate the plants at full capacity," Nyrstar said.
"Indirect cost compensation for energy-intensive producers to protect their competitiveness versus non-EU producers varies by European country and this puts Nyrstar’s Budel, Balen and Auby plants at a competitive disadvantage, compounding the impact of extreme energy prices."
Nyrstar did not say how much zinc production would be lost or provide the production capacity of the three smelters.
Electricity prices have surged to record highs in recent weeks, driven by power shortages in Asia and Europe, with China's crisis expected to last through the end of the year and crimp growth in the world's second-largest economy.
An analyst cautioned, however, that soaring power prices are also likely to hit industrial output, crimping demand for metals.
"We should not forget that not only the primary metals producers are being hit by the power crunch, but also the metals manufacturers, the ones further down the value chain," said Daniel Briesemann at Commerzbank in Frankfurt.
"At the moment, everyone apparently wants to see higher prices, so they are focusing on just one side of the equation."
Benchmark zinc on the London Metal Exchange had gained 3.3% to $3 372.50/t by 09:30 GMT, the strongest since March 2018.
The most-traded November zinc contract on the Shanghai Futures Exchange closed up 1.5% at 24 000 yuan ($3 721.68) a tonne, its highest since November 2007.
"Chinese (zinc) smelters have cut production for several times in the past months, and we have revised down the production forecast by 80 000 t compared with our previous forecast in early 2021," said CRU analyst Dina Yu in Beijing.
The global zinc market will be slightly over-supplied this year and next, the International Lead and Zinc Study Group said on Tuesday.