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Nyrstar has put on strategic options-based hedges to guarantee zinc prices between $2,100-2,200 per tonne for 180,000 tonnes of metal through to the end of the year, the company announced on Wednesday April 24.
At the end of the first quarter, Hotline reported that a zinc producer was rumoured to have made hedging arrangements for 120 lots per month at $2,175 per tonne, in a sign of producers’ changing attitudes to strategic hedging, or “spedging” as some in the market like to call it.
The company entered into the short term hedges in the first quarter to “improve the profitability of the business by, for example, providing targeted financial support for Nyrstar’s assets or to take advantage of price conditions in the market”, it said in an earnings release.
The strategic hedges for the second, third and fourth quarters guarantee zinc prices of $2,100-200 per tonne for 20,000 tpm, while for the second half of the year the company has also arranged upside exposure if prices trade above $2,400 per tonne.
Cash zinc prices settled at $1,860.5/61 per tonne in official trading on the London Metal Exchange on Wednesday.
Despite taking a cautious strategic view on the near-term trajectory for zinc prices, Nyrstar restated its confidence in the medium and long-term outlook for the zinc market. It stressed that it will not lock in multi-year fixed forward deals with no upside.
Mark Burton mburton@metalbulletin.com Twitter: @mburtonmb
[The last paragraph of this article was amended on April 25, to reflect the fact that while Nyrstar will not lock in multi-year fixed forward deals with no upside, it has not committed to not reducing its exposure to the upside for prices through hedging beyond this year.]