PRESS ROOM
Zinc and aluminium are doing despite a tightening physical market
Thursday 22nd September '22
Industrial metals remain down even though the energy crisis in Europe is brewing a very tight metals market in the coming months. Production of metals like aluminium and zinc is very energy intensive and many European producers have cut production given the surge in energy prices. Europe’s largest aluminium smelter, Aluminium Dunkerque said that it would close 22% of production by 1 October, equivalent to 64Kt, noting that electricity prices are “way too high to restart production at full capacity. Europe’s aluminium production has reached its lowest level since the 1970s (source: Bloomberg). The tightness in supply this drop in production will bring is currently not reflected in prices. Aluminium’s futures curve is still in contango (higher futures prices than spot prices). This suggests that, for now, markets are fixated on an impending recession and paying little attention to how tight the market might be when Europe comes out of recession, or somehow avoids it altogether.