Electricity Bill Surge Drives Metal Prices Skyward

Metal Smelting Companies Cut Production One After Another... LME Index Hits Record High

[Asia Economy Reporter Park Byung-hee] The sharp rise in prices of energy-related raw materials such as coal, natural gas, and crude oil is leading to an increase in major metal prices. This is because metal smelting companies are consecutively reducing production as electricity costs soar to an unbearable level due to the rise in energy raw material prices.

According to Bloomberg on the 14th (local time), the London Metal Exchange (LME) index closed at 4,623.4, up 2.6% from the previous trading day, breaking the previous all-time high recorded in 2007. The LME index reflects the price trends of six major non-ferrous metals traded on the LME. The LME index has risen 35% this year.

On this day, the zinc price surged to its highest level since 2007, leading the index increase.

Belgium's major zinc smelting company Nyrstar announced on the same day that it would reduce zinc production at its three European smelters by up to 50%. Nyrstar stated that it decided to cut production because it was difficult to bear the sharply increased electricity costs and the rising costs due to carbon emission reduction. Nyrstar operates smelters in Belgium, France, and the Netherlands. Earlier, Dutch aluminum producer Aldel also announced plans to reduce aluminum production due to increased production costs caused by rising electricity prices.

On the LME that day, zinc prices surged as much as 6.9% intraday before narrowing gains to close up 3.7% at $3,528.50 per ton. Previously, zinc prices on the Shanghai Exchange in China also surged 7.1% to 25,700 yuan per ton.

Aluminum prices also rose 1.6%, reaching the highest level since 2008. Copper prices increased 3.5% to $9,984 per ton, even surpassing $10,000 intraday. Copper prices hit an all-time high above $10,000 per ton in May, then fell to around $8,000, but have recently been on the rise again.

As major raw material prices rise in succession, concerns about inflation are expected to grow further. The Producer Price Index (PPI) for September, released by China's National Bureau of Statistics on the same day, rose 10.7% year-on-year, marking the highest level in 26 years since December 1995 (11.1%).

The International Monetary Fund (IMF) urged in a joint statement released after the International Monetary and Financial Committee (IMFC) meeting that central banks worldwide should remain vigilant against inflation risks amid soaring raw material prices and supply chain disruptions.