Base metals rise as energy crisis reduces supply – .

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Base metals rise as energy crisis reduces supply – .


(Bloomberg) – The world’s most crucial metals continued on a steep rise as energy shortages forced more production cuts and increased pressure on manufacturers, fueling concerns about inflation.
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Producers of metals, from zinc to aluminum and steel, are limiting their production due to electricity restrictions or rising energy costs that outweigh soaring metal prices. The latest victim was one of the main zinc producers Glencore Plc, with production at its three European factories reduced due to soaring electricity prices.

Zinc climbed 12% on the London Metal Exchange in response, the biggest jump since October 2015. Aluminum – a particularly energy-intensive metal – also gained to take this year’s advance to 60%, while copper extended its earnings above $ 10,000 per year. tonne. Friday’s moves came a day after the London Stock Exchange’s benchmark index, made up of six base metals, hit an all-time high.

“Base metals are recovering amid the intensifying energy crisis and heightened inflation fears are rekindling investor enthusiasm,” said Wenyu Yao, senior commodities strategist at ING Bank. “Inflation fears could increase demand for metals, as there is a perception that they are a hedge against inflation, which is especially true for copper. Meanwhile, a pullback in US real rates, along with the broad trade-weighted dollar index over the past two days, is also boosting momentum. “

The supply disruptions come at a critical time for the global economy, threatening to add more pressure to creaky supply chains and stoking fears that inflation risks may persist longer than expected.

Supply cuts began in China as the country restricted electricity to energy-intensive industries, and have now spread to Europe as the region faces its own electricity problems spurred by record gas prices . This is creating new concerns for demand as record raw material costs threaten manufacturing sectors around the world.

Industrial and manufacturing companies around the world have lowered their profit forecasts in recent weeks, while Germany’s major economies in the UK are growing more slowly than expected.

Glencore’s zinc cuts followed an announcement earlier this week that Nyrstar – another large producer – would cut output at three European smelters by up to 50% amid rising electricity prices and costs associated with carbon emissions. Meanwhile, Matalco Inc., America’s largest producer of aluminum billets, is warning customers it could cut production and ration deliveries as early as next year due to a magnesium shortage. Steelmakers, including ArcelorMittal, have also cut production.

Copper, the most important industrial metal, has also skyrocketed. It recorded the biggest weekly gain since 2016 and is experiencing a growing decline as global stocks decline due to the recovery in demand and disruption caused by the pandemic.

“As most metals are in offset and the physical demand high, the ingredients are there for significantly higher prices, especially for aluminum and zinc, but also to penetrate the copper and tin market”, said Kieron Hodgson, analyst at Panmure Gordon. “It is increasingly likely that these prices will persist throughout the fourth quarter before the inevitable comeback occurs. “

Zinc LME was up 7.5% at $ 3,794.50 per metric tonne at 5:51 pm in London. All other major metals advanced, with aluminum up 1.7% and copper up 3%.

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