Zinc prices in international markets have been retreating relentlessly for the past few months. At the end of September, prices dipped to $757 per tonne from levels of $792 per tonne at the beginning of the year.
After peaking a little above $1,200-per tonne briefly in late 2000, zinc prices have been moving only one way - down.
For Indian producers, the drop in prices below the $1,000-mark in 2001 on global markets was not a cause for concern. Domestic prices were anyway below that of the landed cost of imported metal. Moreover, the depreciating rupee provided a reasonable amount of cushion.
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Now, however, with prices staying below $800 per tonne, and the rupee displaying unexpected strength against the greenback, the going has become progressively worrying for major domestic producers.
They may be forced to revise selling prices downwards. Imported zinc now has the potential to become competitive if the price of Indian zinc is not brought down.
The outlook in the short-term is also bleak for several reasons. The slowdown in the US has obvious adverse implications for demand. At the same time, there are no signs of any constriction in supply.
In fact, according to the report by International Lead and Zinc Study group (ILZSG) released on October 4, production of global zinc (refined) is expected to be 9.8 million tonnes, up from last year