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Zinc loses strength, rates seen range-bound until February

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Newswire18 Mumbai
Last Updated : Jan 29 2013 | 2:54 AM IST

Economic turmoil and lack of fundamentals to trigger demand are expected to keep global zinc prices range-bound till February, analysts said.

With prices already near cost of production, no further fall is also expected in coming months, they said.

“Currently, zinc is close to bottoming out. Fundamentally, there is no strength in the metal. Moreover, it is already near to cost of production, so further price fall is not likely,” said Prakash Prabhu, analyst from Greenback Commodities.

Cost of zinc production for large-scale manufacturers is $1,200-$1,600 per tonne.

At 2:40 pm, three-month zinc contract on the London Metal Exchange was at $1,230 a tonne, up 0.74 per cent from Tuesday’s close.

Zinc is expected to move between $1,100 and $1,500 a tonne in next two-three months, Prabhu said.

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Overseas zinc prices have plunged over 57 per cent to the current level from a high of $2,900 seen in March.

“Weakening demand due to global economic downturn pushed prices close to cost of production levels,” said an analyst from a Mumbai-based broking firm.

Steel sector demand
Demand for zinc from domestic steel sector is expected to fall by about 35-40 per cent mainly due to slump in zinc-coated steel exports from India, exporters said.

Recent global financial crisis that had pinned down world demand for zinc-coated steel products is expected to fall further until February, they said.

“Exports of zinc-coated steel has come down drastically by about 50 per cent and is likely to slide further until January-February,” said a top official from Uttam Galva Steel.

India manufactures 5 million tonnes of zinc-coated steel annually. Of this, about 2 million tonnes is consumed domestically, and remaining is exported to euro zone and other countries in the world.

Uttam Galva Steel, Tata Steel and Jindal Steel are some of the key zinc-coated steel exporters in India.

Zinc demand for industrial purposes is currently strong, and is expected to remain firm in coming months as cautious buying continues in domestic market, traders said.

“Buying of zinc is currently taking place as per requirement — in lots — and this is expected to continue as prices (zinc) are seen declining with each day,” said Surendra Mardia, president of Bombay Metal Exchange.

Apart from steel industry, zinc is widely used in making of copper and brass alloys.

Zinc alloys have strong application in automobile industry. “Though the global scenario is gloomy, compared to the world, domestic demand is better. There is perhaps a fall of 30 per cent in demand (domestic) but the 70 per cent still exists,” Mardia said.

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First Published: Nov 27 2008 | 12:00 AM IST

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