LONDON, Oct 19 (Reuters) – The London Metal Exchange (LME) zinc price surged 26% last week to hit a 14-year high of $3,944.00 per tonne. The spark for the explosive rally was Nyrstar’s Oct. 13 announcement that it was reducing output by up to 50% at its three European smelters in the face of spiralling energy prices.
The panic spread when Glencore said it too was “adjusting production” across its European operations to reduce exposure to peak power pricing periods during the day. China’s power-related zinc supply problems were in the price. Europe’s weren’t.
The sheer scale of the price reaction, though, is revealing. This was a market that until Nyrstar’s bombshell news was convinced the zinc price was heading lower. True, zinc had stubbornly declined to conform to the bear consensus for many months but the narrative was still one of an inexorable shift towards supply surplus.
That narrative was due a rewrite even before Europe’s smelters started powering down.
When the International Lead and Zinc Study Group (ILZSG) held its meeting in April, it forecast global refined zinc production would exceed usage by 353,000 tonnes this year.