Glencore, the embattled FTSE 100 miner and commodities trader, sparked the biggest rally in a decade in zinc prices on Friday after announcing it would cut one third of its annual production of the silver-grey industrial metal.
Up to 1,600 jobs will be lost as a result of the move to cut 500,000 tonnes of zinc production, or about 4% of global supply. The company, the world’s largest miner of zinc ore, said at current prices it was better to keep its resources in the ground.
“Glencore believes that current prices do not correctly value the scarcity of our zinc resources,” the company said.
The price of zinc, mainly used to coat steel and in roofing, has fallen 30% since May to five-year lows. But it jumped 12% after the announcement to reach the highest level for two months and record the biggest one-day gain in 10 years. Other commodities, including lead and nickel, were propelled higher.
About a third of Glencore’s annual zinc output will be stopped, mostly from mines in Australia, where 535 jobs will be lost. Operations in South America and Kazakhstan will also be affected.
The zinc cuts come on top of an array of measures Glencore announced last month to help it slash its $30bn (£19bn) in net debt by a third, including lower copper production, suspension of its dividends and a sale of new shares.
Shares in the company have endured a rollercoaster ride, slumping to a record low last month of 68.62p but they have since recouped their losses and ended Friday 7% higher at 129p. At flotation in 2011, the shares were priced at 530p.
The cuts will reduce the company’s fourth quarter zinc production by 100,000 tonnes. It had previously expected to produce between 1.52m tonnes and 1.57m tonnes of the metal this year.
“Glencore remains positive about the medium and long term outlook for zinc, lead and silver. However, we are taking a proactive approach to manage our production in response to current prices,” it said.
The majority of the job losses are expected to be in Peru. In Australia, operations at the Lady Loretta mine in Queensland will be temporarily suspended, while output will be reduced at the George Fisher mine in Queensland and McArthur River mine in the Northern Territory.
