Zinc prices on the LME surged 9.2% over three trading sessions to reach $2,960 per tonne, its highest level in eight months, as two major zinc mines in Peru and Australia announced significant production curtailments due to ongoing labour disputes. The Antamina mine in Peru reduced output by 40% while Australia's McArthur River mine declared force majeure following a work stoppage by unionised workers, together removing approximately 180,000 tonnes of annual zinc supply from the market.
The supply shock caught commodity traders off-guard as zinc had been trading in a narrow range for several months amid concerns about weak Chinese construction sector demand, which is a key end-use market for galvanised steel. The combination of unexpected supply disruption and early signs of stabilisation in China's property sector created a perfect storm for zinc prices, triggering significant short-covering by hedge funds with bearish positions.
India's zinc sector is dominated by Hindustan Zinc, which is the world's third-largest integrated zinc producer. The company's stock gained 6.8% on the LME price surge and analysts have upgraded earnings estimates for the company given its significant zinc production volumes and low cost of production from its Rajasthan mines. Higher zinc realisations could translate to an 8-10% earnings upgrade for Hindustan Zinc for FY27 if prices sustain at current elevated levels.
