Shanghai zinc prices firmed on Tuesday, hitting their highest levels in nearly three weeks, on global supply concerns after miner and commodity trader Glencore announced plans to put its zinc sulphide operations in Italy under maintenance.
The most-traded January zinc contract on the Shanghai Futures Exchange was up 3.5% at 23 710 yuan a tonne, as of 07:48 GMT. It touched its highest since November 4 of 23 980 yuan a tonne earlier in the session.
Three-month zinc on the London Metal Exchange edged 0.2% higher to $3 355.50 a tonne, having earlier hit a more than two-week high of $3 359.
Glencore said the zinc plant in Portovesme, which has a capacity of 100 000 tonnes a year, would be put on care and maintenance until there was "a meaningful change in power market prices".
"The driving momentum is mainly from the European market because there are some potential risks for cutbacks at smelters due to the energy issue," said CRU analyst Dina Yu in China.
However, the Chinese market fundamentals are not good, Yu said, adding supply was increasing with lower disruption from power restrictions while demand from housing and construction sectors had weakened.
The premium of LME cash zinc over the three-month contract rose to $52.80 a tonne, its highest since October 29, indicating tightening nearby supplies as LME inventories of the metal fell to 175 025 t, their lowest since July 2020.
"We see the net impact of high power prices as bullish for aluminium, and zinc, as it drives up marginal costs and may result in further output closures," Citi analysts said in a note.