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Mitsui Mining & Smelting is increasing
zinc prices this year in annual contracts by at least 35% for the Japanese
company’s customers in Asia as supply tightens and freight rates soar.
The constrained availability of cargo ships
is a big contributor to the rise, Kenji Sugawara, general manager of the
Tokyo-based smelter’s metal sales department, said in an interview on Thursday.
The price increases mark a turnaround from the previous two years when Mitsui
Mining was forced cut the premium it charged overseas buyers, he said.
The upper end of this year’s increase for
customers, including steelmakers, for those located in regions beyond Asia is
100%, Sugawara said.
The big increases reflect tightening
supplies of zinc, which is used to galvanize steel for cars and for
construction. According to Sugawara, the market will return to a deficit in
2022 for the first time in three years as major smelters in Europe are forced
to pare output due to ballooning costs triggered by surging electricity rates.
Base metals including zinc, copper and
aluminum have all soared this month, with the London Metal Exchange’s LMEX
index hitting a record last week amid tight supplies and higher energy costs.
The three-month zinc contract is up 41% in the past 12 months to $3 649.50 a
ton as of 11:04 am in Tokyo on Friday.
“While the current overheated market may
calm down, we expect high levels of prices” to continue, Sugawara said, adding
that zinc is expected to stay above $3 000 a ton this year.
Sugawara’s views are in line with those of
Hindustan Zinc, India’s biggest producer, which said on Thursday that prices of
the metal will continue to trade at elevated levels.
The expected reopening of economic
activities from virus-related lockdowns, combined with easing of the supply-chain
bottlenecks that have curtailed vehicle output, will help increase consumption
of zinc this year, Sugawara said. Global demand for zinc will likely fall short
of output by 150 000 t in 2022, following a balanced market last year, he
added.