SHANGHAI, Oct 13 (SMM) - Since the second half of 2021, the price of electricity in Europe has fluctuated greatly, constantly hitting new historical highs. The underlying causes of the European energy crisis mainly include the following two aspects: 1. High dependence on external energy. 2. Insufficient renewable energy. The European energy crisis is difficult to solve. Electricity generation is under severe threat due to disrupted natural gas supply from Russia and the repeated technical problems of French nuclear power plants. Almost all power generation methods have been affected, ranging from hydropower, wind power, nuclear power to natural gas and coal power plants. From the perspective of the electricity price index, since the middle of last year, electricity prices in major European smelting capacity centers have kept going up. France began to dismantle some nuclear power installations last year, resulting in a sharp decline in nuclear power production since the first quarter of 2022. The current overall electricity price has risen 4-5 times compared to the same period last year. Based on the electricity consumption of 3,700kWh per mt of zinc in Europe, the theoretical unit electricity cost of zinc smelting rose from 150 euros/mt at the beginning of 2021 to 850 euros/mt in the first quarter of 2022. Europe is one of the global refined zinc production hubs, with a production capacity of 2.3 million mt, accounting for 16% of the world total. Soaring costs forced major smelters to reduce production one after another. Led by Nyrstar, one of the world's largest zinc smelters, and Glencore, the annual zinc smelting plans have been significantly reduced since last year.
On the whole, since the European power structure still relies on traditional energy supply, the risk of further rise in European energy and electricity prices has not been eliminated. This, coupled with currency tightening, will further aggravate the recession of the European economy, thereby dragging down the demand for commodities. However, the sharply rising costs will continue to trigger production cuts at the smelting end, thereby limiting the decline in zinc prices. Zinc prices may hold relatively firm among base metals.
