LONDON: Aluminium and zinc prices climbed on Tuesday, with buying spurred on by concerns over supply disruptions because of prolonged high power prices, while industrial metals in general were boosted by a weaker dollar.
Benchmark aluminium on the London Metal Exchange (LME) was up 1% at $2,836 a tonne by 1709 GMT, having gained more than 40% last year. Zinc, meanwhile, added 1.6% to $3,590 after a 28% rise in 2021.
“The power story and shortages (of aluminium and zinc) are going to be with us for a while,” a metal industry source said. “Inventories are already low and more metal is due to leave (LME-registered) warehouses.”
Traders said the Omicron coronavirus variant was not a major focus because the risks to global growth appear to be modest.
POWER: Lower than usual wind speeds in Europe and less electricity generated by wind turbines worsened a crunch last year that sent power prices to record highs as utilities had to buy more coal as well as scarce and costly natural gas.
European gas prices soared more than 30% on Tuesday as low supplies from Russia reignited concerns about an energy crunch as the region heads for colder weather.
“There is still plenty of uncertainty for the European gas and power market. An implication of this is that it will be very difficult for energy-intensive users to secure a competitive power deal going forward,” said ING analyst Wenyu Yao.
“The impact may last long beyond the 2021/2022 winter season.”
ASIA: High power prices and disruptions were already a problem in China even before Indonesia banned coal exports for January. Indonesia is China’s largest overseas supplier of the coal used in power plants.
DOLLAR: The dollar index reversed early gains after data showed that manufacturing activity in the United States slowed in December.
A weaker US currency makes metals priced in dollars cheaper for holders of other currencies, which could boost demand.
INVENTORIES: Aluminium stocks are down more than 60% since the middle of March, while zinc stocks have fallen more than 30% since April.
OTHER METALS: Copper rose 0.8% to $9,796 a tonne, lead was down 0.3% at $2,298, tin advanced 0.9% to $39,200 and nickel added 1.6% to $21,095.