Prices for base metals are surging led by zinc which has reached its highest level since 2007.
The latest increase in metals prices comes after European smelters became the latest casualties in a global energy crisis that’s knocking supply offline and ratcheting up pressure on manufacturers.
The price of zinc rose as much as 6.9% on the London Metals Exchange, and a gauge of six industrial metals is closing in on an all-time highs Thursday (October 14).
Aluminum, one of the most energy-intensive commodities, is at its highest level since 2008. Copper bounced closer to the $10,000 U.S. a ton mark and spreads are pointing to a sharply tighter market.
Spot copper contracts are trading at their biggest premium over futures in nearly a decade as global inventories shrink.
Five out of the six base-metal contracts on the London Metals Exchange are in backwardation, signaling broad pressure on spot supply.
The price jumps are due to supply cuts spreading from China to Europe, as energy shortages drive up costs for electricity and natural gas, threatening more inflationary pressure from rising commodity prices.
Nyrstar, one of the biggest zinc producers in the world, said it will cut output at three European smelters by up to 50% due to rising power prices and costs associated with carbon emissions.
So far, the energy crisis has had an outsized impact on supply but concerns about demand are also rising as manufacturers face a simultaneous surge in raw material prices across the board.
Strains in China are particularly evident, where factory-gate prices rose at their fastest pace in almost 26 years in September. It’s a surge that could spill over to other economies given the nation’s role as the world’s largest exporter.
Some Chinese smelters have reduced runs in recent weeks as they struggle with an electricity shortage fueled by record coal prices.
