Zinc prices rally amid reduced output and soaring energy prices
Zinc prices have skyrocketed again amid fears of reduced output in already tight markets.
The trace metal has soared 15 per cent since mid-March, when it began its latest upswing, rising to $4,470 per tonne on the London Metal Exchange today.
Zinc is commonly used to galvanising iron and steel against corrosion, and in making brasses and alloys for die-casting.
Russia’s exports of zinc are negligible, but its invasion of Ukraine has elevated the general price of commodities over the past month.
Prices peaked at all-time high of $4,896 per tonne on March 8 as the West ramped up sanctions on Russia – but the spike was over in a matter of hours.
Markets then fell back to as low as $4,100 per tonne before being rejuvenated in a further rally.
Meanwhile, soaring wholesale costs are driving up energy bills – which is increasing the general cost of manufacturing.
European smelters have also been struggling with capacity problems and post-pandemic demand – resulting in production cuts across the continent.
Commerzbank Daniel Briesemann explained: “The zinc market is very tight even without any further production cuts. The International Lead and Zinc Study Group (ILZSG) is likely to confirm this at its spring meeting at the end of this month and downwardly revise its optimistic prediction of a small supply surplus this year.”
He also noted market participants are also pointing to the continual decline of zinc stocks in the LME’s warehouses, which have now dropped to just shy of 138,000 tons, putting them at their lowest level since July 2020.
The analyst also highlighted only half of the material is available to the market because the remainder has already been earmarked for shipment from the warehouses.
Forecasting future price movements, he said: “In our opinion, there is much to suggest that the zinc price will remain at a high level for now.”