Zinc Prices Reach Five-Week High Amid Supply Concerns from Chinese Smelters
Zinc prices surged to their highest levels in five weeks on Friday, driven by concerns over supply disruptions after leading smelters in China, the world's top producer, agreed to reduce production due to low ore availability and weak profits.
On the London Metal Exchange (LME), three-month zinc rose by 1.6% to $2,904 per metric ton by 10:45 GMT, marking its highest point since July 16.
This week, 14 major zinc smelters in China decided to adjust their planned maintenance schedules and delay the commissioning of new production capacity in response to ongoing challenges. These include falling treatment charges (TCs)—the fees smelters receive from miners to process ore concentrate into zinc—due to a tight supply of zinc ore since the fourth quarter of 2023.
China, which accounts for nearly half of the world's refined zinc production, is facing significant supply chain pressures. "The zinc price has some catch-up potential," commented Nitesh Shah, a commodity strategist at WisdomTree. He also highlighted that inventories on the Shanghai Futures Exchange (SHFE) have sharply decreased by 33% over the past two months, exacerbating concerns over supply.
The broader LME market saw gains across all six major metals, buoyed by investor optimism about potential interest rate cuts. U.S. Federal Reserve policymakers indicated support for beginning rate cuts as early as next month, with further insights expected from Fed Chair Jerome Powell later on Friday.
"China is still waiting for the U.S. to cut rates, so that could be much more significant," Shah added, noting that such a move could prompt the People's Bank of China (PBOC) to take more aggressive actions, given the current weakness in China's economy.
In other metals, LME aluminium increased by 0.8% to $2,500 per ton, boosted by tight supply of raw materials like alumina and bauxite. This metal also marked its largest weekly gain since mid-April, having reached a six-week high of $2,531 per ton on Thursday.
Elsewhere, LME copper rose by 1% to $9,220 per ton, nickel climbed by 1% to $16,770, lead jumped by 1.9% to $2,092.50, and tin was up 1.3% at $32,735 per ton.
