Base metals continue their record rally
Supply cuts fuel fears of inflation

Base metals continued to extend profits after climbing record highs on Thursday as global energy shortages cut supply, put pressure on manufacturers and fueled concerns about persistently high inflation.
An index of six base metals on the London Metal Exchange rose to an all-time high on Thursday, led by zinc, which hit its highest level since 2007 as European smelters as well as Chinese mills cut production due to an energy crisis. Aluminum, one of the most energy-intensive raw materials, hit a new 13-year high on Friday and copper stayed above the $ 10,000 a ton mark.
Some producers are struggling with blackouts while others are cutting their production as the rise in electricity prices outpaces the recovery in metal markets. The combination of high energy costs and the broad surge in commodity prices this year is fueling concerns that inflation risks may persist longer than previously thought, dampening the outlook for policymakers and jeopardizing the global economic recovery.
The latest impetus for metals came earlier this week when Nyrstar - one of the largest zinc producers - announced it would cut production at three European smelters by up to 50% due to rising energy prices and the costs associated with carbon emissions. Meanwhile, Matalco Inc., the largest US manufacturer of aluminum ingots, warned its customers not to cut production and ration supplies as early as next year because of a magnesium shortage.
Copper faces its biggest weekly gain since 2016 and is in widening backwardation as global inventories shrink due to the recovery in demand and pandemic interruptions. The Rio Tinto (NYSE: RIO) group announced on Friday that the start-up of its Oyu Tolgoi project in Mongolia has been delayed for at least three months after restrictions related to Covid hampered progress.
Copper futures rose 0.5% to $ 10.035 on the LME and are up more than 7% this week. Nickel rose by over 1%. Zinc rose 0.1% and was on the way to the biggest weekly profit since 2008. The aluminum futures in Shanghai closed at a record level.
Elsewhere, Singapore iron ore fell 1% to $ 122.40 a ton as investors weighed declining demand in China against Rio Tinto's downgraded forecast for shipping. Prices in Dalian fell 1.7%.





