Hind Zinc jacks up prices by 3%

Hindustan Zinc Ltd (HZL), the largest domestic zinc producer, has raised prices of its zinc products yet again by 3 per cent or Rs 5,900 a tonne across all categories effective from today. This is its second price hike in this month. Earlier, the company had raised prices by Rs 8,100 a tonne on May 5.

With today's upward revision, the price of high-grade zinc rose to Rs 1,85,900 a tonne, that of special high-grade zinc increased to Rs 1,86,100 a tonne.

HZL has also raised lead prices by Rs 2,400 in all delivery centres to Rs 64,800 a tonne ex-Chanderia. These prices are exclusive of excise duty of 16 per cent and central sales tax of 1 per cent.

The latest price hike is mainly attributed to the price surge on the London Metal Exchange (LME) in the wake of the plant closure decision at Grupo Mexico and supply deficit forecast by the International Lead & Zinc Study Group.

Zinc prices on the LME gained by $251.5 a tonne to $3610.5 a tonne in May. Interestingly, the metal has witnessed a one-way gain of about 90 per cent this year from $1,912 a tonne on January 3.

The key supportive factor behind the surge is the declining inventory, which witnessed a loss of 5,850 tonne since May 2 and 1,40,750 tonne since the beginning of this year.

To make the scenario more critical, the metal on warrant declined by as much as 1,18,650 tonne.

Mexican zinc miner Grupo Mexico SA is planning to close the San Martin zinc mine in the state of Zacatecas, where workers have been on strike for the last two months. The company has had no response from the state government to its requests to restore access to the facility, which is being blocked by picketers. The strike, which has been prolonged by a dispute over the leadership of the National Mining and Metal Workers Union, has been declared illegal by labour authorities.

San Martin is Grupo Mexico's third-largest zinc mine producing about 15,000 tonne zinc concentrate a year compared with overall company production of 1,30,000 tonne.

Meanwhile, Teck Cominco Ltd has shown "high degree of confidence" in the strength of the zinc market for at least the next two years, based on persistent demand, falling inventories and limited prospects for new

production. Daily falls in the LME zinc inventories have pared warehouse stocks back to 2,50,000 tonne from 7,00,000 tonne a year ago and "at that rate, it will run out fairly soon," an analyst said.

"Current stocks are very tight. So, if demand carries on anywhere near it is today, we think, the outlook for zinc is very strong. So, we do have a high degree of confidence that, for at least the next few years, the

outlook is very good," Lindsay of Tech Cominco said.The recent report of Societe Generale, which indicates the global zinc market's deficit at 3,50,000 tonne during 2006 reasoning struggling smelter output to keep up with strong demand, created a panic buying in the market.

While zinc will remain in deficit for 2007, there are now first signs of a major change ahead "� not only in the market balance, but also in the balance of power between mines and smelters. Demand growth for 2007 is forecast strong at 4.5 per cent, but mine production could jump 9 per cent following the restart of the Lennard Shelf mine in Australia from the first quarter in 2007 with annual output of 70,000-80,000 tonne alongside other restarts of idled mines.