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LONDON: Zinc and aluminium prices stormed to fresh peaks on Wednesday as a power crisis sparked cuts in smelter output.

The metal’s price in Shanghai touched its highest in nearly 14 years, while the price in London jumped more than 5% to its strongest in more than 3-1/2 years after Nyrstar said it will cut production by up to 50% at its three European zinc smelters because of soaring electricity costs.

Electricity prices have reached record highs in recent weeks, driven by power shortages in Asia and Europe, with China’s crisis expected to last through to the end of the year and crimp growth in the world’s second-largest economy.

An analyst cautioned, however, that soaring power prices are also likely to hit industrial output, denting metals demand.

“We should not forget that not only the primary metals producers are being hit by the power crunch, but also the metals manufacturers, the ones further down the value chain,” said Daniel Briesemann at Commerzbank in Frankfurt.

“At the moment, everyone apparently wants to see higher prices, so they are focusing on just one side of the equation.”

Benchmark zinc on the London Metal Exchange (LME) vaulted 5.4% to $3,440 a tonne, its strongest since March 2018, before paring gains to $3,405 by 1600 GMT.

The most-traded November zinc contract on the Shanghai Futures Exchange closed 1.5% up at 24,000 yuan ($3,721.68) a tonne, its highest since November 2007.

The three Nyrstar smelters have combined annual output of about 690,000 tonnes, Morgan Stanley said in a note.

“Chinese (zinc) smelters have cut production for several times in past months, and we have revised down the production forecast by 80,000 tonnes compared with our previous forecast in early 2021,” said CRU analyst Dina Yu in Beijing.

A weaker dollar index, down 0.4%, also supported metals prices.

Aluminium, the most power-intensive base metal, was unchanged on the LME at $3,068 a tonne after hitting its highest since July 2008 at $3,118.50.

LME copper climbed 2.2% to $9,673 a tonne and lead advanced 1.7% to $2,248 while nickel dipped by 0.4% to $18,905 and tin fell 0.2% to $36,400.

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