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Due to supply-chain issues in Kazakhstan stemming from the Russia-Ukraine conflict, Glencore has cut its 2022 zinc production forecast by 65,000 to 945,000 mt. This expected drop in full-year production continues the trend seen so far this year. In the first three quarters of this year, the company produced 699,600 mt of zinc, down 18% from the same period in 2021. The drop in production so far this year was largely due to mine closures in Canada and South America, and also COVID-related worker absences in Australia. In 2021, Glencore produced 1.117 million mt of zinc, or nearly 8.5% of the world’s mine production. (Source: Reuters) |
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Zinc prices at the LME are down nearly 23% this year, with the last trade at $2,731/mt (7:00 AM CST). 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 note that zinc options have lower liquidity than swaps. Please contact AEGIS for specific strategies that fit your operations. (11/1/2022) |
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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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10/26/2022: 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? |
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10/31/2022: LME Week: Nickel market looks for stability 10/28/2022: Ford North American sales fall sequentially 10/28/2022: Glencore cuts zinc output guidance after production drops 18% in nine months 10/27/2022: US Steel earnings, steel production drop 10/27/2022: Glencore to stick with Rusal's aluminium in 2023 -sources |
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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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