Hind Zinc cuts product prices on LME dip

Forced by the price decline on the London Metal Exchange (LME), Hindustan Zinc Ltd (HZL) today slashed prices of its products.

The company cut the price of high-grade zinc by 1.5 per cent or Rs 2,500 a tonne to Rs 1,83,400 a tonne, from Rs 1,85,900 a tonne in its last revision on May 11. The price of special high-grade zinc was also brought down with immediate effect to Rs 1,83,600 a tonne from Rs 1,86,100 a tonne as per the last revision.

The price of lead was also revised downwards by Rs 900 to Rs 63,900 a tonne. The largest domestic zinc producer revises prices of its products in sync with the movement on the LME.

The price of zinc on the LME slumped by $665 to $3,325 a tonne on May 19 from $3,990 a tonne on May 11. Inventories shed 4,725 tonne to 2,46,950 tonne from 2,51,675 tonne during the period under consideration.

Globally, prices of commodities are passing through a consolidation phase. All are declining, as they have already scaled their highs, an analyst said.

The fall in the case of zinc was attributed to the end of 10-week old strike at Grupo Mexico's zinc mine in Zacatecas that began on February 28. The company has revised its plans to shut the mine, as it reached an agreement with the striking workers.

San Martin is Grupo Mexico's third-largest zinc mine, producing about 1,400 tonne zinc concentrate a month. The company produced 1,30,000 tonne last year. Apparently, production at the zinc mine would add to the existing supplies and, thereby, the anticipated shortage of zinc concentrate would ease, a trader said.

On the other hand, Russia's Urals Mining and Metallurgical Company is all set to begin construction of a zinc smelter with capacity of 1,40,000-1,50,000 tonne a year in the Siberian Sverdlovsk region in 2007. The announcement assumes significance as zinc producers were fearing that zinc concentrate would be in short supply by 2007.

Experts believe that global zinc prices were peaking up, taking into account the likelihood that inventories on the LME would touch the nadir, possibly by the end of 2007.

Given the factors, including the 1,00,000-tonne zinc inventories that have piled up in New Orleans, which need to be cleaned up before exporting, decline in production by Tech Cominco etc, zinc inventories are forecast to witness a deficit of 3,40,000 tonne in 2006, 1,20,000 tonne in 2007 and 1,70,000 tonne in 2008.

Teck-Cominco postponed the restart of its Lennard Shelf, at Pillara mine, until early next year. The mine is expected to open for about four years at a rate of about 1 million tonne annually, producing around 1,15,000 tonne of zinc concentrate a year compared with 3,00,000 tonne in the past.

Breakwater Resources Ltd, the Canadian miner, produced 27,878 tonne of zinc concentrate during the first quarter of 2006, 35 per cent less than the same period last year, owing to a drop in average zinc ore grades to 6.2 per cent from 6.6 per cent, and delays in improving underground working areas at Myra Falls that curtailed planned output.