Supply fears drive up aluminum and zinc prices

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LONDON, Jan. 4 (Reuters) – Prices for aluminum and zinc soared on Tuesday as buying spurred on concerns over supply disruptions due to prolonged high electricity prices, while metals Industrials in general were boosted by a weaker dollar.

Benchmark aluminum on the London Metal Exchange (LME) rose 1% to $ 2,836 per tonne at 4:24 pm GMT, after gaining more than 40% last year. Zinc, meanwhile, added 1.6% to $ 3,590 after rising 28% in 2021.

“The history of electricity and shortages (of aluminum and zinc) are going to be with us for a while,” said a source from the metallurgical industry. “Inventories are already low and more metal is expected to leave the warehouses (registered at LME). “

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Traders said the Omicron coronavirus variant was not a major target as the risks to global growth appear to be modest.

ELECTRICITY: Slower than normal wind speeds in Europe and less electricity produced by wind turbines exacerbated a crisis last year that pushed electricity prices to record highs as utilities had to buy more coal as well as rare and expensive natural gas. Read more

European gas prices climbed more than 30% on Tuesday as weak supplies from Russia rekindled concerns of an energy crisis as the region heads into colder weather. Read more

“There are still a lot of uncertainties for the European gas and electricity market. This implies that it will be very difficult for energy intensive users to reach a competitive energy deal in the future”, said Wenyu Yao, analyst at ING.

“The impact could last well beyond the 2021/2022 winter season.”

ASIA: High electricity prices and disruption were already a problem in China even before Indonesia banned coal exports for January. Indonesia is China’s largest overseas supplier of coal used in power plants. Read more

DOLLAR: The dollar index (.DXY) reversed its initial gains after data showed manufacturing activity in the United States slowed in December. Read more

A weaker US currency makes dollar-valued metals cheaper for holders of other currencies, which could stimulate demand.

INVENTORIES: Aluminum inventories have fallen more than 60% since mid-March, while zinc inventories have fallen more than 30% since April.

OTHER METALS: Copper rose 0.1% to $ 9,733 per tonne, lead fell 0.2% to $ 2,299, tin rose 0.9% to $ 39,195 and nickel added 1.6% to $ 21,080.

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Reporting by Pratima Desai Editing by David Evans and David Goodman

Our Standards: Thomson Reuters Trust Principles.


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