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| The three month price of the base metal on London Metal Exchange (LME) zoomed up to 28 month high of $907.50 per tonne last week from levels of $785 per tonne at the beginning of July.
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| Zinc prices on the London Metal Exchange have been rising since hitting lows in late 2002, but have underperformed in comparison with other LME metals due to the problem of a huge supply surplus, Domestic manufacturers will benefit from the higher international prices as the domestic prices are pegged to LME prices.
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| However, steel manufacturers, especially the units into galvanising steel, may see an increase in their input costs.
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| Importantly, since India faces a shortage of zinc as domestic demand is far in excess of supply, the domestic zinc smelters stand to gain.
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| Both the domestic producers Hindustan Zinc and Binani Industries have plans to raise capacities, but they will not be able to completely match the demand.
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| Currently, zinc production in the country is about 2.25 lakh tonnes while demand is expected to be around 3.50 lakh tonnes this year. The demand supply gap is met through imports and recycling of waste.
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| If anything, zinc demand in the country is all set to soar with the revival of steel industry almost after a decade.
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| The steel industry is the largest consumer of zinc accounting for almost 75 per cent demand of zinc. Of this, most of the demand emanates from units engaged in galvanising steel to make it rust proof.
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| Moreover, with infrastructure projects picking up in the country, demand from the construction sector has been increasing.
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| The metal is considered to be best anti-corrosion agent in building and construction applications. It is also extensively used in telecommunication towers, hi-mast lighting etc.
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| For the Indian companies, the more comforting factor is that domestic production is still just about competitive against imports.
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| In addition, domestic zinc production has been rising steadily at the rate of five to six per cent.
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| The demand for zinc in the home market is expected to stay firm. The demand-supply gap in the country is expected to be around 1,25,000 tonnes and this is trend would go a long way in providing a strong cushion to local producers. Higher sales will offset any decline in realisations only to a reasonable extent.
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The recent uptrend in the international market for zinc has been caused by a sharp rise in demand from China. China
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