Korea Zinc plunged more than 10% in early trading on the 4th. As tensions between the United States and Iran intensified and silver prices fell, investor sentiment toward Korea Zinc, a smelter, appeared to have frozen.
As of 9:51 a.m. on the 4th, Korea Zinc was trading at 1,778,000 won, down 205,000 won (10.34%) from the previous session on the Korea Exchange.
According to the New York Mercantile Exchange, silver futures settled at $88.85 on the 2nd (local time), down $4.44 (4.76%) from the prior session, and fell another $5.38 (6.05%) to $83.47 on the 3rd.
The drop in silver prices appears to have worsened investor sentiment toward Korea Zinc, a smelter. Korea Zinc sells precious-metal byproducts such as gold and silver recovered during the zinc and lead smelting process. As of last year, silver accounted for about 30% of Korea Zinc's sales.
In particular, smelters have a high share of fixed costs, such as labor and concentrate procurement costs, so when precious-metal prices fall, profitability deterioration tends to be amplified in a leveraged manner. For this reason, stock price volatility tends to increase during phases of sharp declines in gold and silver prices.