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Zinc price surges amid supply fears

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The zinc price enjoyed its biggest one-day gain since October 2021 after Nyrstar announced its Budel zinc smelter in the Netherlands would be placed on care and maintenance.

Benchmark zinc on the London Metal Exchange (LME) rose as much as 7.2 per cent to $US3819 ($5457) per tonne on Tuesday before pulling back to $US3620 ($5173) per tonne (t) just before 6.00pm UK time.

Nyrstar announced Budel would be placed on care on maintenance from September 1 “in response to various external factors impacting the business”.

The global metals manufacturer said Budel has an annual nominal production capacity of 315,000 tonnes of zinc, but the smelter has been operating at a reduced capacity since the fourth quarter of 2021.

Global zinc producer Glencore raised concerns around the current inflationary environment in early August, suggesting “various smelters cut production” across the first six months of 2022 “amid soaring energy costs”.

The zinc price has been on an upward trajectory since mid-July after plummeting below $US2900/t.

The Australian Government’s Resources and Energy Quarterly – prepared by the Office of the Chief Economist – forecasts the zinc price to average around $US3750/t in 2022, driven by robust global construction activity and continued refined supply shortages in Europe.

It’s not all good news, however, with the Resources and Energy Quarterly predicting the zinc price to fall to $US2900/t by 2024.

“Prices are expected to decline from the current high levels, as short-run disruptions to mining production are resolved and more production capacity comes online,” the June edition of the report stated.

The Resources and Energy Quarterly estimated Australia’s zinc production to be around 1.3 million tonnes (Mt) in 2021–22, which is projected to climb 4.9 per cent per year to around 1.4Mt in 2023–24.

Emerging Australian zinc projects include the Woodlawn zinc-copper restart project in New South Wales, which Develop purchased in February after its previous owner Heron Resources entered voluntary administration in July 2021.

Develop aims to conduct an aggressive underground drilling program to grow Woodlawn’s inventory, targeting extensions to known mineralised zones.

Woodlawn produced 13.8 million tonnes of 19.7 per cent zinc equivalent from 1978 until 1998.

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