September 07, 2008

Zinc surges on supply cut fears in China due to earthquake

Bloomberg reported that zinc prices on LME and SHFE have surged on concerns that China's strongest earthquake in 58 years may reduce output and supplies zinc in the world's largest producer.

Zinc for delivery in three months on London Metal Exchange rose by as much as USD162 or 7.4% to USD 2,340 per tonne, the biggest intraday increase since February 27th 2008. It later traded at USD 2,310 per tonne.

Zinc for July delivery on the Shanghai Futures Exchange, rose by as much as CNY 725 per tonne 4% from the previous settlement to CNY 18,920 yuan per tonne, the highest since April 11th 2008.

As per reports, zinc smelters in Sichuan province, where the magnitude 7 9 quake struck on May 12th 2008, accounted for 5.5% of total Chinese output in 2007. Sichuan Hongda Chemical Industry Co, China's third largest zinc producer, is based in the area.

Mr Wang Zheng, an analyst at Fubao Metal Co in Shanghai said that “People are not just worried about production losses in Chengdu. Output may be lost from neighboring Gansu province as well because of power shortages.' The provinces affected by the quake account for more than 10% of China's total production of refined zinc. It may take at least three months to restart output if it is halted.