Zinc prices jumped on Tuesday after one of Europe’s largest smelters said it will halt production indefinitely, as shockwaves from the energy crisis rip through the region’s industrial base.
Nyrstar, a zinc producer controlled by Trafigura, announced in a statement on Tuesday that its Budel smelter in the Netherlands will shut down for “care and maintenance” from September 1 until further notice.
News of the closure sent prices for the metal, which is used to rustproof steel, shooting to the highest level since early June on Tuesday, gaining 2.8 per cent to hit $3,698 per tonne.
The Budel smelter is able to produce 315,000 tonnes of zinc per annum, accounting for roughly 2 per cent of global production, but the site has been operating at reduced capacity since the final three months of last year.
Earlier this month, Glencore, another of the world’s largest zinc producers, warned that its zinc business was the most affected by the increase in energy costs in Europe, creating a “challenging” environment for its smelting operations.
Citibank estimated that zinc production in Europe was down 8 per cent in the first half of the year compared with the second half of 2021, adding that it expects further smelter production cuts later this year.
“Unlike copper and nickel, smelter cuts should cushion zinc prices from the worst of the consumption weakness,” said analysts at the bank.
Stocks of zinc at the London Metal Exchange have plummeted by 70 per cent since last year, as traders have drawn on supplies from warehouses after smelters slashed production.