Steel firms prune zinc intake as prices surge

A change in consumer pattern and higher prices have reduced zinc consumption by steel galvanisers by 40-50 per cent in the last six months.

Domestic steel galvanisers reduced their consumption to 45-60 gram per square metre zinc compared with 90-120 gram per square metre six months ago.

Nittin Johari, CFO, Bhushan Steel & Strips, said the Indian steel galvanising sector is moving in line with the international trend where consumption of whitish raw material for galvanising, about 65 per cent of world zinc production used for this purpose, declined to 90-100 gram per square metre against 180-200 gram per square metre.

Demand for the cost-effective galvanised steel sheet forced producers to look for an alternatvive. Besides, they also failed to pass the higher price on to their customers.

Prices of galvanised sheets went marginally up by 10-15 per cent compared with the 123.85 per cent spurt in the last year. Zinc prices on the London Metals Exchange (LME) skyrocketed in 2006 to close the year at $4,280 after touching the historical high of $4,600 in the fourth quarter of the year.

During the period, inventories slumped by 77.55 per cent from 3,93,550 tonne in the beginning of the year to 88,350 tonne by the year-end.

Though prices of galvanised steel sheet differ as per the specifications, industry sources said the product with average thickness was quoted at Rs 50,000 per tonne, today.

"Steel galvanisers started looking for a substitution when the prices reached $2400," said Ankit Miglani, director of Uttam Galva Steel.

Zinc cannot be replaced fully, but its consumption quantity can be reduced, he added. Aluminium arrived in the scene which zinc was scarcely supplied in the aftermath of the devastating flood in the US last year which resulted in a substantial quantity submerged in the warehouses.

By the time the warehouses got rid of the dirt to recover the submerged zinc, users had found the alternative metals to be used.

Ankit agreed on the shorter life by 25-30 per cent of galvanised sheets which are produced with modified raw material mix.

In case of colour coating, colour side is prone to more damages than is the case with corrosion. Hence, there is no difference for using zinc or alternative metal for colour coating, an expert said.