Zinc prices dip 37%, likely to remain soft

Zinc prices have dipped nearly 37 per cent since the beginning of this year till date on the London Metal Exchange.

Analysts expect the weakness in the non-ferrous metal to continue next year, too, as the global refined zinc metal production is expected to increase 7.8 per cent to 12.2 million tonnes in 2008 and, as a result, the global zinc market it is expected to be in a surplus to the tune of 200,000 tonnes in 2008, according to London-based Natixis Commodity Markets.

Amongst domestic players, Hindustan Zinc is the key supplier which is also expanding its capacity, with its 170,000 tonne zinc smelter expected to shortly commence operations. In the September 2007 quarter, Hindustan Zinc's production of refined zinc was 94,108 tonnes as compared with 78,444 tonnes in the corresponding quarter last year.

The current price of zinc is at $2,681 a tonne levels on the LME, as compared with $4,258 a tonne at the beginning of the year. To negate the impact of lower spot prices of LME zinc, Hindustan Zinc and other large players typically have long-term contracts with their key customers.

However, analysts highlight that the Asian consumption of zinc is expected to remain strong in the new year, given expectations of growth in demand from key user industries like galvanised steel and batteries.

Meanwhile, Asia's (including India) consumption of zinc during the period January-August 2007 amounted to 3,968,000 tonnes, as compared with 3,802,000 tonnes in the corresponding period of the previous year, highlighted Portugal-based global industry body, International Lead and Zinc Study Group.