Shanghai zinc prices rallied to their highest since July 2007 last week on worries over supply shortages in top consumer China. The most-traded May zinc contract on the Shanghai Futures Exchange rose as much as 5.4% to 28,995 yuan a tonne ($4,554.16), before settling up 3.2% at 28,395 yuan ($4,459.92).
Benchmark zinc on the London Metal Exchange hit $4,521.50 a tonne, the highest since March 8. Prices of the metal, used to galvanize steel, hit a record high of $4,896 a tonne last month. Zinc inventories in Europe have drawn down sharply and the situation is worsening for European smelters to keep their margins positive amid fears of another power crisis.
Market analyst Fitch Solutions Country Risk & Industry Research has recently revised its 2022 zinc price forecast higher by more than 20% to $3,500 per tonne. In a report, Fitch argues that metal prices are being bolstered by the energy crisis stemming from the ongoing Russian invasion of Ukraine that has led to many smelters halting or reducing zinc metal production.
Concerns over spot supply have been growing in the zinc market this month, with a sharp rise in orders to withdraw stocks from LME warehouses helping to lift prices toward a record high. Zinc stocks in LME-registered warehouses are at 120,825 tonnes, their lowest since June 2020 and down more than 40% since December. China’s refined zinc output fell on both an annual and monthly basis in March as the covid-19 outbreak disrupted transportation of raw materials. Nickel price too jumped by 4.9% to 215,060 yuan ($33,778.88) a tonne, after rising to its highest since March 31 earlier in the session.