Graphic: Zinc prices seen solid over European winter on likely smelter shutdowns

Nyrstar NV

03/12/2021 13:56

By Eric Onstad
    LONDON, Dec 3 (Reuters) - Zinc prices are due to remain firm
over coming months on the potential for soaring power costs
causing more disruptions at smelters, keeping supply and
inventories tight.
    Benchmark zinc prices  CMZN3  on the London Metal Exchange
have shed about a fifth since surging to a 14-year peak in
mid-October after smelter shutdowns in Europe were less severe
than expected.
    However, since the start of the year, prices of zinc, which
is mainly used for galvanising steel, are up 16%.
    
    
    Prices spiked after Nyrstar  NYR.BR  said it would cut
production by up to 50% at its three European zinc smelters, but
customers have so far been adequately supplied, said
Helen O'Cleary, senior analyst at consultancy CRU. urn:newsml:reuters.com:*:nL1N2R90G2
    "Of course, there is still potential for cutbacks given that
European power prices remain high and are likely to do so
through the winter months," she added.
    CRU has pencilled in 40,000 tonnes of disruptions outside of
China in the fourth quarter and expects LME prices to rise to an
average of $3,500 a tonne next year, from $3,190 at midday on
Friday.
    Glencore  GLEN.L  said last week it would suspended zinc
operations at its 100,000 tonne a year Italian plant due to high
power prices.  urn:newsml:reuters.com:*:nL1N2SD0TG 
    Bulgaria's Plovdiv smelter has also shut https://newsfounded.com/bulgariaeng/due-to-high-electricity-prices-kcm-plovdiv-stopped-working-2.
    European power prices have soared to multi-year highs this
year and they are unlikely to ease before the end of the year,
analysts say.  urn:newsml:reuters.com:*:nL8N2QC1H6 
    

    Most European smelters use energy-intensive electrolysis and
smelter costs had jumped by nearly $900 a tonne based on peak
power prices this year, Bank of America commodity strategist
Michael Widmer said in a note.
    Low treatment charges, which smelters charge miners for
processing concentrates, are also crimping smelters' bottom
line.
    
    
    JP Morgan expects a refined zinc deficit this year of about
50,000 tonnes and 34,000 tonnes in 2022, with prices averaging
$3,400 a tonne in the first quarter of next year, it said in a
note.
    Inventories are at low levels, leaving scant cushion if a
fresh wave of smelter shutdowns hit the sector during the
winter. 
    LME stocks have nearly halved since April while Shanghai
Futures Exchange levels are down 43% since March.
     

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
European power prices due to hold at strong levels during winter
   https://tmsnrt.rs/3EjIKOg
Benchmark zinc prices retreat from peak, but to stay firm    https://tmsnrt.rs/3IjCIj9
Zinc treatment charges at weak levels    https://tmsnrt.rs/3GeYXoz
Zinc inventories erode on LME, ShFE    https://tmsnrt.rs/3EsvIOE
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Eric Onstad; Additional reporting by Eileen
Soreng in Bengaluru; Editing by Susan Fenton)
 ((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO;
 Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))