Top producer Glencore slashes zinc output by a third

Mining giant Glencore, burdened by debt and a commodity price crash, announced Friday it was slashing its worldwide output of zinc by a third, sending the metal's price sharply higher. Glencore, one of the world's largest miners and producers of zinc, said it was lowering zinc production by 500,000 tonnes across its operations in Australia, South America and Kazakhstan. "The main reason for the reduction is to preserve the value of Glencore's reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources," the miner and commodities trader said in a statement. Global zinc prices, which had fallen by nearly 30 percent since May, shot up 12 after Glencore's announcement, rising as high as $1,875 a tonne in trade in London. The company meanwhile saw its share price surge 7.0 percent to close at 129.1 pence in London trading. Glencore said its operations at Lady Loretta in Australia and Iscaycruz in Peru would be suspended and operations at George Fisher and McArthur River in Australia and various mine operations in Kazakhstan would reduce production levels. "These changes, which represent around one-third of Glencore's annual zinc production, will reduce fourth quarter 2015 mine production by approximately 100,000 tonnes of contained zinc metal," Glencore said. The overall cut is equal to 3.8 precent of the world's zinc production last year, analysts at the investment bank Commerzbank said in a report, predicting it would "significantly tighten" the global zinc market. The zinc market has been suffering from a supply glut amid a sharp drop in demand from China, which consumes about 40 percent of global production. In light of the oversupply dogging the market, Accendo Markets research chief Mike van Dulken hailed Glencore's move, which he said was "designed to restrict market supply and help put a floor under prices which have fallen to five-year-lows." The Swiss-based Glencore, which employs around 181,000 people worldwide, acknowledged that "these changes, although temporary, will unfortunately affect employees at our operations." - More than 1,500 jobs - A company spokesman told AFP that around "1,540 people will unfortunately lose their jobs." "This decision has not been taken lightly," the company said. It said that in coming days it would "engage with all employees" and provide support for those affected by the changes. Zinc has a number of industrial applications, including as an anti-corrosive coating for iron and steel, a component for batteries and making metal alloys, and as a white pigment in paint. Around 13.5 million tonnes of zinc is produced worldwide each year, according to the latest data from 2013 from the International Lead and Zinc Study Group. Glencore said its decision would "ensure that our zinc operations are sustainable well into the future, providing jobs in the communities where we operate and returns to shareholders." "Glencore remains positive about the medium and long term outlook for zinc, lead and silver prices," it said. Before the decision, the company's share price had plummeted 60 percent since the beginning of the year, and it has faced wild fluctuation in recent weeks amid investor fears that sinking commodity prices will affect its ability to meet outstanding debt obligations. Most resources-linked firms have taken a hit in recent months as the price of copper, aluminium, iron ore and oil have tumbled as growth in China's economy, the world's second largest, slows. Glencore has been particularly badly hit because of its huge $30-billion debt load, even after the firm this month raised $2.5 billion via a share issue as part of a vast plan to rejig its finances. Glencore has already mothballed output at two copper projects in Africa, and on Wednesday closed a platinum mine in South Africa, cutting more than 800 jobs.