The Commodities Feed: Zinc supply woes

Metals

The latest supply woes in zinc pushed LME 3m prices to a three-year high, hitting an intra-day high of $3,440/t yesterday, whilst prices in Shanghai jumped to their highest in nearly 14 years. Nyrstar said it would slash zinc production at three smelters in Europe by up to 50% due to rising power prices and costs associated with carbon emissions. Prior to this, Nyrstar had already announced that it would cut zinc production at a Dutch plant due to rising power prices last month. We discussed this in detail in a note released yesterday. As for copper, the LME cash/3m spread backwardation continued to move higher, reaching US$95/t (highest since May 2014) as inventories continue to fall.

China released its preliminary trade data for metals, which shows that copper imports halted their five months of declines in September, as shipments held up by the coronavirus pandemic finally arrived. Total monthly shipments for unwrought copper rose 3% MoM to 406kt last month; however, they were still down 44% from September 2020. On a year-to-date basis, unwrought imports declined 19.5% YoY to 4.1mt in the first nine months of the year. Imports of copper concentrate stood at 2.11mt (highest since March) in September, up 11.9% MoM, however, remained slightly down when compared to the same month last year. Cumulatively, imports rose 6.3% YoY and totaled 17.4mt in the first nine months of the year. Iron ore imports declined 1.9% MoM to total 95.6mt last month, while fell 3% YoY to total 842mt over the first nine months of the year. On the export side, China’s unwrought aluminium and aluminium products shipments rose 15% YoY to 492kt (highest since March 2020) in September. In the first nine months, total exports were up 14.3% YoY to total 4.1mt. Meanwhile, cumulative exports of steel products rose 31.3% YoY to total 53mt over the first nine months of the year.

China has ordered steel mills in Beijing, Tianjin and Hebei province to trim output during the upcoming heating season starting from mid-November to mid-March. In addition, mills must also meet annual output reduction targets by the year-end. Mills are also required to reduce crude steel production from 1st January to 15th March by at least 30% from the same output period last year.