Zinc price extends gains for sixth day on supply worries

San Juan de Nieva zinc operations. Credit: Glencore.

Prices of London zinc were on track for their sixth straight session of gains on Thursday, as rising energy costs prompted smelters to close and fueled worries about supply disruptions.

Three-month zinc on the London Metal Exchange was up 0.5% at $3,244 a tonne, as of 0729 GMT, having gained 11% in two months.

About half of the European Union’s aluminum and zinc production capacity “has already been forced offline due to the power crisis,” industry association Eurometaux said.

Fitch Solutions projected the global zinc market to post a deeper deficit of 228,000 tonnes in 2022 from a shortfall of 48,000 tonnes in 2021, before switching to be in a surplus of 13,800 tonnes in 2023, it said in a report.

“A complete shutdown of Russia’s gas deliveries to Europe,” which would rapidly accelerate the pace zinc refinery capacity in the region was taken offline, said Fitch Solutions.

However, on the downside, global economic growth could weaken more significantly than current estimate, which would drag zinc demand and prices lower.

LME aluminum rose 1.3% to $2,299 a tonne, tin gained 0.1% to $21,200 a tonne and copper advanced 0.4% to $7,830 a tonne.

The most-traded October zinc contract on the Shanghai Futures Exchange eased 0.6% to 24,675 yuan ($3,539.72) a tonne while aluminum increased 1.2% to 18,880 yuan a tonne.

ShFE tin rose 1.4% to 176,830 yuan a tonne, copper was down 0.4% at 62,220 yuan a tonne and nickel fell 0.4% to 189,050 yuan a tonne.

Prospects of better demand from the real estate sector also lifted sentiment, after property giant China Evergrande Group announced it would restart frozen construction projects, and on hopes of more supportive policies in China.

The construction sector consumes a vast amount of metals.

Producers of energy-intensive aluminum in Yunnan province will continue operating with 10% less power, with no sign of when restrictions implemented this week will be lifted, officials at two producers said.

But gains in metals prices were capped by a firm dollar, fueled by prospects of a solid interest rate increase after US consumer prices unexpectedly rose in August.

($1 = 6.9709 yuan)

(By Mai Nguyen; Editing by Rashmi Aich, Sherry Jacob-Phillips and David Evans)

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