Zinc prices rise Rs 1,150 in less than two months

Zinc slabs price has jumped dramatically by Rs 1,150 to Rs 9,050 per quintal in Mumbai non-ferrous metals market in the last one-and-a-half month on rising demand from the steel galvanising industry.

Galvanised steel is a major component of infrastructure projects such as buildings, bridges, airports and stadiums. Approximately 67 per cent of zinc produced globally is used for steel galvanising. The devastation caused by Hurricane Katrina also added to the surge in zinc price as 50 per cent of global zinc deposits lies in warehouses in New Orleans.

Spot zinc on LME perked up $125 to $1,484 per tonne on October 11 following a supply crunch. LME registered warehouses in New Orleans are holding 2,48,575 metric tonne (mt) of zinc, of which 2,01,375 mt is open tonnage.

The supply of the metal was suspended since "good delivery" became impossible because of the hurricane. The price movement in the international market and the domestic market is in sync.

An increasing concern in the market is the strike at Belgian metals company Umicore SA's 2,50,000 mt Balen zinc smelter plant. The strike began last Thursday. Analysts believe the prices would increase further, if the company management does not resolve the issues immediately.

Usually the rising prices take a toll on treatment charges "" fee paid to miners to refine concentrate into zinc metal "" which is expected to dip to double-digit figure this year due to a persistent concentrate shortage.

In 2005, the benchmark treatment charges fell to a record low of around $126 a mt. In the next year, annual contracts might conclude as low at $95-$110 per mt.

Apart from steel galvanising, zinc is primarily used by the toys industry, which consumes approximately 16 per cent of the world zinc production.

India being one of the largest toys producer and consumer, domestic demand for zinc is expected to grow significantly. Hindustan Zinc is the largest zinc producer in the country with an overall production of 5.75 lakh tonne. Binani Zinc comes at the second slot with a capacity of 33,000 tonne.

The price of zinc slabs is expected to grow further in the domestic market as the production here has failed to meet the rising demand from consumer industries. The demand, which stood at 3.5 lakh tonne in 2003-04, stood at 4 lakh tonne in 2004-05.

The demand is expected to grow 12-15 per cent in the next five years.