Base metals rose again as global energy shortages continued to weigh on supplies, adding pressure on manufacturers and fueling concerns about persistently high inflation.
Zinc rose as much as 6.3% to a 14-year high after major producer Glencore Plc said it was cutting production at three European plants due to higher energy prices. Aluminum – a particularly energy-intensive metal – is up 62% this year. Copper extended gains above $10,000 a ton, after sharp declines in warehouse stocks indicated increasingly critical global supply pressures.
Friday’s gains come after the benchmark index of six base metals on the London Metal Exchange rose to an all-time high on Thursday. Zinc is on track for a record weekly gain of 18%, as European smelters join Chinese factories in cutting production due to the energy crisis.
Some producers are grappling with blackouts, while others are cutting production as the increase in energy costs has outpaced the rise in metals markets. The combination of rising energy costs and broad advances in commodities this year has fueled fears that inflation risks may persist longer than previously expected, clouding policy makers’ outlook and threatening the global economic recovery.
Glencore’s zinc cuts follow an announcement earlier this week that Nyrstar – another big producer – will cut production at three European smelters by up to 50% due to higher energy prices and costs associated with carbon emissions. Meanwhile, Matalco Inc, the largest US producer of aluminum bars, is warning customers that it may reduce production and ration shipments as soon as next year amid a magnesium shortage.
Copper is set to post its biggest weekly gain since 2016 and is in a widening lagging state as global inventories shrink due to recovering demand and disruptions from pandemics. The Rio Tinto group said on Friday that the start of the Oyu Tolgoi project in Mongolia had been delayed by at least three months after Covid-related restrictions hampered progress.
Copper rose 1.9% to $10,174 on the London Metal Exchange. Nickel advanced 2.6%. Aluminum futures in Shanghai closed at a record high.