Zinc prices surged after Glencore Plc, a major mining conglomerate, temporarily halted operations at its McArthur River mine in northern Australia. The mine, a significant producer of zinc and lead, was affected by heavy rainfall associated with a recent cyclone.
Record Rainfall Triggers Mine Closure
Glencore announced the closure after the mining site experienced record-breaking rainfall, surpassing the previous high set in 1974. The company is closely monitoring floodwaters in the area and assessing the potential impact on ongoing operations. The temporary shutdown has sent shockwaves through the zinc market, leading to a price increase.
Zinc prices on the London Metal Exchange (LME) rose as much as 2.5% to $2,571.50 per metric ton following news of the Glencore mine closure. This price increase reflects concerns about potential disruptions to global zinc supply.
The copper market, on the other hand, experienced a different trajectory this week. Copper prices initially climbed to an 11-month high, fueled by positive signals from the Federal Reserve regarding future interest rate cuts. A weaker US dollar, often triggered by rate cuts, typically makes dollar-denominated commodities like copper more attractive to foreign investors.
However, copper price gains were short-lived, paring back later in the week. Despite the recent pullback, copper prices remain over 10% higher compared to six weeks ago. This overall upward trend is attributed to a combination of factors, including supply concerns and a generally more optimistic outlook for the global economy.
Bullish Bets on Copper Supported by Strong Demand Outlook
Investor sentiment in the copper market remains bullish. Open interest, which refers to the number of outstanding contracts on the Shanghai Futures Exchange, has reached a record high of over 500,000 in recent weeks. This surge in open interest suggests that investors are increasing their bets on rising copper prices in the future.
Analysts at Goldman Sachs believe the copper market could face a significant supply shortage in 2025. They point to several factors contributing to this potential scarcity, including record-low copper stockpiles, peak mine supply expected next year, and rapidly growing demand driven by the green energy transition.
While the immediate impact of the Glencore mine closure on zinc prices is clear, the long-term implications for the market remain uncertain. The extent of the disruption and the timeline for resuming normal operations will be crucial factors influencing zinc prices in the coming months.
The copper market, on the other hand, appears headed for a period of tightness, with strong demand growth potentially outstripping supply soon. Investors and industry stakeholders will be closely monitoring developments in both the zinc and copper markets as they navigate this dynamic global commodity landscape.
Source: Mining.com
