Metals sector woes caused by power crunch set to deepen

POWER woes as a result of extraordinarily high energy prices are taking a toll on the industrial metals sector - one of the most energy-intensive businesses - with closures of smelters in Europe causing great uncertainty across the industry.

The months-long energy crunch has led to the tightest market conditions, which has kept power prices elevated, more so since Russia’s invasion of Ukraine in February that led to disruption of gas supplies and Western oil sanctions against Moscow. In Europe, the pain has been especially acute and is set to deepen as the continent braces itself amid skyrocketing prices of natural gas and electricity even as a heatwave curtails energy supplies. The coming winter is set to be no less challenging against a backdrop of limited heat to homes.

Norway’s Norsk Hydro said it planned to shutter an aluminium smelter in Slovakia from September. Dutch zinc smelter Nyrstar, of the Trafigura group, has said it will suspend production at its Budel plant in the Netherlands end of the same month, citing “external factors” impacting its business. The pain is widespread. Drought and power rationing across southwestern China have forced metal processing plants that are highly energy-intensive to halt production. This in turn has led to a supply crunch in the industrial metals space.