LONDON (Reuters) – Belgian zinc producer Nyrstar issued a profits warning last week, citing “adverse market conditions”. The company, which last year produced over a million tonnes of refined zinc, is feeling the pain from the dramatic price collapse of the last six months.
London Metal Exchange (LME) zinc hit an 11-year high of $3,595.50 per ton in February. It is currently trading at $2,525 after touching a two-year low of $2,283 in August.
Retreat turned into rout as zinc got caught up in the broader LME sell-off, speculative players using the base metals complex to vent their trade war angst. The resulting price implosion has opened up a disconnect with zinc’s internal supply-demand dynamics.
Right now the zinc price is suggesting that a wave of new mine supply is crashing along the supply chain. It isn’t. The supply response to two years of rising zinc prices is only just starting.
Treatment charges, which is what companies such as Nyrstar receive for processing mined concentrate into refined metal, are still “historically low”, compounding the financial hit from the low zinc price.