(Bloomberg) -- Mitsui Mining & Smelting Co. is increasing zinc prices this year in annual contracts by at least 35% for the Japanese company’s customers in Asia as supply tightens and freight rates soar.

The constrained availability of cargo ships is a big contributor to the rise, Kenji Sugawara, general manager of the Tokyo-based smelter’s metal sales department, said in an interview on Thursday. The price increases mark a turnaround from the previous two years when Mitsui Mining was forced cut the premium it charged overseas buyers, he said.

The upper end of this year’s increase for customers, including steelmakers, for those located in regions beyond Asia is 100%, Sugawara said. 

The big increases reflect tightening supplies of zinc, which is used to galvanize steel for cars and for construction. According to Sugawara, the market will return to a deficit in 2022 for the first time in three years as major smelters in Europe are forced to pare output due to ballooning costs triggered by surging electricity rates. 

Base metals including zinc, copper and aluminum have all soared this month, with the London Metal Exchange’s LMEX index hitting a record last week amid tight supplies and higher energy costs. The three-month zinc contract is up 41% in the past 12 months to $3,649.50 a ton as of 11:04 am in Tokyo on Friday.

“While the current overheated market may calm down, we expect high levels of prices” to continue, Sugawara said, adding that zinc is expected to stay above $3,000 a ton this year. 

Sugawara’s views are in line with those of Hindustan Zinc Ltd., India’s biggest producer, which said on Thursday that prices of the metal will continue to trade at elevated levels. 

Read: Hindustan Zinc Says Prices to Stay Strong Due to Power Costs

The expected reopening of economic activities from virus-related lockdowns, combined with easing of the supply-chain bottlenecks that have curtailed vehicle output, will help increase consumption of zinc this year, Sugawara said. Global demand for zinc will likely fall short of output by 150,000 tons in 2022, following a balanced market last year, he added.

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