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**AEGIS is attending the SMU Steel Summit Conference 2022 at the Georgia International Conference Center in College Park on August 22 – 24. If you would like to schedule a meeting during the summit, please contact Patrick McCrann at pmccrann@aegis-hedging.com or (713) 936-2806. ** |
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Zinc prices are surging over 6% this morning after Trafigura announced it will be shutting down one of Europe’s largest smelters beginning next month due to high electricity prices. Even prior to this announcement, analysts were increasing their zinc price forecasts. Earlier this week, Citigroup predicted that despite falling demand, further smelter curtailments in Europe due to an ongoing power crunch could lead to a rebound in zinc prices over the next 12 months. The bank has thus raised its three-month price target to $3,200/mt, and its six-to-twelve-month target to $3,400/mt. Both targets are up $400/mt from their prior forecast. However, the bank remains “marginally bearish,” as the power crisis in Europe could also suppress demand. Last trade for the 3M contract was $3,785/mt (7:00AM CST). Zinc prices have already bounced over 20% since mid-July due in part to smelter shutdowns and could rally further if more curtailments occur. Zinc’s forward curve has also shifted vertically higher and is severely backwardated. This allows a zinc end-user such as a galvanizer to hedge future purchases at prices lower than the current spot market. Buying swaps or call options are viable strategies, as either would establish a maximum zinc price. Such positions are basic for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (8/16/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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Price Indications |
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Today's Charts |
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AEGIS Insights |
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08/10/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 08/09/2022: Aluminum prices are finding support: Consumers can lock in lower costs in 2023 and beyond 08/02/2022: Russia Finds New Alumina Supply 07/27/2022: American Automotive Production is on the Rebound |
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8/16/2022: Nyrstar to put Budel zinc operations on care and maintenance on Sept 1 8/15/2022: Green steel still decades away: BlueScope 8/12/2022: Sky-high energy costs to fan fire under aluminium and zinc prices |
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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