Cheap oil adds fuel to the problem of metals glut

London

THE collapse in oil and coal prices isn't just bad news for the energy industry. It's also compounding a global surplus in metals.

Ores are extracted with diesel engine diggers and trucks, while smelters that process metal run on electricity from coal-fired power plants. Energy accounts for as much as a third of the industry's costs at a time when everything from aluminium to zinc is mired in a prolonged slump and more mines are losing money. With oil tumbling about 70 per cent in the past two years to less than US$30 a barrel, cheaper fuel is allowing metals companies to delay production cuts needed to halt their own slide in prices.

"There is an incredibly powerful link between base metals and oil prices," said Dan Smith, a commodities analyst at Oxford Economics in London. "If we see oil going down to US$20 or even lower, it's going to mean lower …