Industrial metals blast off as energy crisis drags down supply

MINING.COM Staff Writer | October 15, 2021 | 11:40 am IntelligenceMarketsEuropeAluminumZinc

Credit: Nyrstar

The world’s most crucial metals continued to surge higher on Friday, with zinc recording the biggest daily gain in six years after hitting a 14-year high Wednesday and aluminum holding near a 13-year high, as energy shortages continue to disrupt the global supply chain.

Producers of industrial metals from zinc to aluminum are restricting output as rising energy costs outpace the spike in metal prices, or because of power restrictions in key economies such as Chin

“As most metals are in backwardation and physical demand high, the ingredients are there for materially higher prices, most notably in aluminum and zinc but also permeating into the copper and tin market,” said Kieron Hodgson, an analyst at Panmure Gordon in a Bloomberg report.

“It is increasingly likely these prices may persist throughout the fourth quarter before the inevitable return-to-earth occurs.”

The latest victim was global miner and metals trader Glencore, which saw zinc production at its three European plants being cut due to surging power prices. This follows an earlier announcement that Nyrstar — another big producer — intends to reduce output at three European smelters by up to 50% due to rising power prices and costs associated with carbon emissions.

Zinc spiked as much as 12% on the London Metal Exchange (LME) in response, the biggest increase since October 2015. The industrial metal is now sitting at its highest since 2007, with pressure continuing to pile on manufacturers following the wave of smelter shutdowns across Europe.

Aluminum, which is particularly energy intensive, also gained on Friday, taking this year’s advance to 62% this year. Earlier this week, aluminum rallied to its highest since 2008 as the deepening power crisis squeezed supplies of the metal used in everything from beer cans to iPhones.

Last month, analysts at Goldman Sachs and Citigroup boosted their price outlooks for aluminum, citing smaller output from China and tighter fundamentals for metals across the globe.

Matalco Inc., the largest US producer of aluminum billet, is also warning customers it may curtail output and ration deliveries as soon as next year amid a magnesium shortage.

Friday’s gains come after the benchmark index of six base metals on the LME rose to an all-time peak on Thursday. Year-to-date the LMEX index has gained 35%.

(With files from Bloomberg)

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