Natural gas prices in Europe soared rapidly on the back of planned closure of the largest gas field in Europe and the blackout of natural gas plants in Norway. Meanwhile, the Swedish mining company Boliden would suspend the production of the largest zinc mine in Europe in Ireland due to "unsustainable financial losses".
As such, LME zinc prices outperformed. At present, European smelters still have profit margin of around $350/mt and the energy issue will have insignificant impact on production at smelters. At the same time, Swiss mining company Glencore plans to restart its Nordenham zinc smelter in Germany with an annual production capacity of 160,000 mt. Deliveries to LME warehouses have not completed. Spot premiums in Europe continued to fall. Support from fundamentals is weak.
Domestically, the supply of raw materials at smelters is relatively sufficient thanks to imported zinc concentrate. The overall supply is stable. On the consumption front, the performance of galvanising has improved on the back of policy support, while die-casting and zinc oxide sectors remain weak. Zinc prices are expected to rebound. Open interest of the SHFE 2307 zinc contract is at the highest level in three years, and the positive policies will also bolster zinc prices.
