Zinc surged after one of Europe's largest smelters announced it would halt production next month as the continent's energy crisis threatens to hobble heavy industries.
The Budel smelter in the Netherlands - controlled by Trafigura Group's Nyrstar - will be placed on care and maintenance from Sept 1 "until further notice," according to a company statement. Zinc jumped as much as 7.2 per cent on the London Metal Exchange as traders priced in even tighter supply.
Earlier this month, top zinc producer Glencore warned that Europe's energy crisis posed a substantial threat to supply. Smelters across the region are barely turning a profit and the 315,000 tons-a-year Nyrstar plant has been operating at a reduced rate since the fourth quarter of last year. Industries from fertiliser to aluminum are being crippled by soaring energy costs as Russia squeezes gas flows to Europe following its invasion of Ukraine.
The decline in European production has seen local LME stockpiles fall close to zero this year, while global inventories remain near the lowest in more than two years.
"There will be a bit of capacity juggling going on," said Tom Price, an analyst at Liberum Capital. "If the EU need their metal, they will probably have to import more semi-refined material or the metal itself."
Aurubis AG, Europe's largest copper producer, said earlier this month that it aims to minimise gas usage in Germany and pass on surging power costs to its customers as the region's energy crisis deepens. Some of Europe's biggest energy users are striving to adapt amid warnings that sky-high prices for gas and power could persist for years.
Other regions are also facing power crunches, including top metal producer and consumer China. Soaring temperatures are stretching power supplies and drying up water for hydro-electricity, forcing key aluminum-hub Sichuan to vow it will ensure power supply for residential use.
Zinc rose 6.6 per cent to US$3,800 a ton on the LME by 11:34 am. London time, after earlier touching the highest in two months. Aluminum climbed 2 per cent while copper edged 0.2 per cent higher. bloomberg