Zinc skyrocketed after one of Europe's largest foundries announced that it would halt production next month, citing the energy crisis.
The Budel foundry in the Netherlands, owned by Nyrstar within the Trafigura Group, will cease production for maintenance and repairs from 1 September. Zinc rose 7 percent on the London Metal Exchange as investors priced the market to tighten further.
Earlier this month, one of the largest zinc producers, Glencore Plc, warned that the energy crisis in Europe poses a significant threat to supply. The Nyrstar plant, which has a production capacity of 315,000 tons per year, has been operating at low capacity since the fourth quarter of last year, while foundries in the region are barely making a profit.
After Russia's invasion of Ukraine, many industries across Europe, from fertilizers to aluminum, have been severely damaged by rapidly rising energy prices.
Global metal stocks at two-year low
The decline in European production caused London Metal Exchange (LME) stocks to approach zero, while global stocks fell to the lowest level in two years.
“There seems to be a challenge in capacity,” said Tom Price, Liberum Capital Analyst. "If the EU needs metal, they will have to import more semi-finished raw materials or the metal itself."
Aurubis AG, Europe's largest copper producer, announced at the beginning of this month that it aims to minimize the use of natural gas and pass on the rising energy prices to its customers as the energy crisis deepens in the region.
On the other hand, Europe is not the only region struggling with energy shortages. In China, the world's largest metal producer and consumer, rising temperatures cause the water beds used in hydro-electricity production to dry and power lines to be forced.
This situation caused the aluminum centers in Sichuan to allow the use of energy only in residences.
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