The decline in European zinc production has seen local LME stockpiles fall close to zero this year, while global inventories remain near the lowest in more than two years.
“There will be a bit of capacity juggling going on,” said Tom Price, an analyst at Liberum Capital. “If the EU needs their metal, they will probably have to import more semi-refined material or the metal itself.”
Supply concerns are still being balanced by the impact of the energy crisis on demand, which has caused many economists to predict a recession in Europe. Economic data on Monday from China, the world’s top metals consumer, added to those fears as the nation struggles to mitigate the impact of Covid-19 curbs, the property slump and the recent heat waves.
China is also facing an energy crunch which could hit metals output. Soaring temperatures are stretching power supplies and drying up water for hydro-electricity, forcing key aluminum-hub Sichuan to vow it will prioritize electricity production for residential use.
The soaring cost of natural gas in Europe is contributing to demand destruction as well as impacting the ability of companies to supply products. That’s a recipe for a great deal of volatility.Click HERE to subscribe to Fuller Treacy Money Back to top