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Glencore will idle its 165,000 mt/yr Nordenham, Germany zinc smelter starting November 1. AEGIS now estimates that approximately 19% of Europe’s zinc smelter capacity is now offline. AEGIS notes both the declining price of zinc and surging electricity costs very likely played a part in this curtailment, as both factors have destroyed margins for many European smelters. Glencore cited “various external factors” for the shutdown, also stating the plant will remain closed “until the macro-economic environment improves,” according to a company memo supplied to Reuters. As soaring electricity prices have plummeted profit margins, some European smelters have been forced to curtail production fully or partially since late last year. Based on prior estimates from Macquarie, AEGIS now approximates that 399,000 mt of Europe’s zinc smelter capacity is now offline. This is about 19% of Europe’s production, or approximately 2.9% of global production, according to Argus and USGS figures. |
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Zinc prices at the LME are down nearly 30% from the highs of mid-April. Zinc’s forward curve has also shifted vertically lower 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 standard 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. (10/7/2022) |
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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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AEGIS Insights |
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10/05/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 10/05/2022: European Aluminum Smelters Might Have Negative Margins Through 2023 8/31/2022: Will Chilean Production Issues Drive Copper Prices Higher? 8/24/2022: Chinese Aluminum Supply Issues Could Rally Prices 8/16/2022: Zinc Prices Are On The Rebound Due To Supply Issues |
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| Important Headlines | ||
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10/6/2022: LME seeks market opinion on possible Russian metal ban 10/6/2022: Russia may build alumina plant to cut costly dependence on China 10/5/2022: Glencore to place Nordenham zinc smelter on care and maintenance from Nov 1 10/4/2022: Column: London Metal Exchange ducks Russian sanctions pressure 10/3/2022: AutoForecast cuts NorthAm production outlook further 10/3/2022: US Steel idles Mon Valley blast furnace 10/3/2022: BHP lifts steel consumption forecast on surging demand from renewable power farms 10/3/2022: Copper price pressured by crumbling demand |
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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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