Zinc surged to the highest since June 2018 amid speculation that smelters in China’s Yunnan province are reducing output due to a power shortage, according to Li Wenchang, an analyst with researcher Mysteel.
Major smelters were asked to cut power consumption by 10%, which may lead to about 10% of refined zinc capacity being cut, according to estimate from Beijing Antaike Information Development Co.
Yunnan’s monthly refined zinc output was about 75,000 tonnes, according to Antaike. China’s monthly output is around 600,000 tonnes.
LME zinc gained as much as 3.1% to $3,108.50 a tonne. Copper for delivery in July was up 0.35% midday Tuesday, with futures trading at $4.7270 per pound ($10,399 a tonne) on the Comex market in New York.
Click here for an interactive chart of zinc prices
There are also concerns that major producers Peru and Chile will raise taxes on mining companies, potentially squeezing supply, Commerzbank analyst Daniel Briesemann told Reuters.
But he said industrial metals prices had overshot and would likely dip in the second half of the year, with zinc falling to around $2,600-$2,700 per tonne.
(With files from Reuters and Bloomberg)