LONDON - Zinc prices surged to their strongest in two months on Tuesday after production was suspended at a Dutch smelter amid high power prices, stoking fears of shortages.
Benchmark zinc on the London Metal Exchange jumped 6.6% to $3 797.50 a tonne by 10:30 GMT, the highest since June 9.
Nyrstar said it would put its zinc smelting operations at Budel in the Netherlands on care and maintenance from September 1.
Nyrstar had already cut output by up to 50% at its three European zinc smelters while Glencore warned this month that "the current energy supply and price environment poses a significant threat".
"That theme is ongoing due to tightness in the electricity and power market in Europe," said Xiao Fu, head of commodity market strategy at Bank of China International.
"Market inventories have fallen to very low levels and we would expect stocks to continue to fall in Europe."
Low water levels on the Rhine were an added concern, she said.
Dutch gas for September hit the highest levels since March this week, boosted by hot weather in Europe.
Citi upgraded its zinc price forecast for the next three months on Monday to $3 200/t from $2 800/t, saying it expected concern about an economic downturn would weigh on all base metals prices, but zinc would outperform.
"We project greater forecast cuts to European zinc smelter output as winter power shortages play out," Citi said in a note.
LME aluminium, which is also an energy-intensive metal, gained 2.1% to $2 439/t.
Aluminium producer Henan Zhongfu Industrial said it was suspending production this week as China's Sichuan province rationed industrial electricity consumption in its most severe heat wave in 60 years.
In other metals, LME copper edged up 0.2% to $7,992 a tonne, nickel climbed 1.5% to $22 335, lead added 0.2% to $2 182 and tin slipped 0.5% to $24 605.