Zinc wilts under Chinese heat

Prices of zinc nosedived by 15 per cent in January on the news that China has turned a net exporter in 2006 "� for the first time in the last three years. Zinc on Monday was quoted at $3,629 a tonne in London as against $4,259 in the beginning of the month.

China, a big story on any front, has entered the exports market in a big way because of record high prices and global supply concern over the metal. China exported 325,000 tonne last year as compared with 146,000 tonne in 2005, while imports dropped to 318,000 tonne from 621,000 tonne during the same period.

Experts believe China is gradually moving towards becoming a bigger net exporter in 2007, which means the global supply constraints would be compensated by the world's largest producer and consumer of metals.

Zinc inventory on the LME-registered warehouses increased 17 per cent since shrinking to the lowest in more than 15 years on December 4 at around 75,000 tonne. In January, the inventory bounced back to 98,575 tonne as on Monday in comparison with 90,475 tonne on January 2.

The Chinese government has imposed a 5 per cent tax on exports of zinc with purity of less than 99.995 per cent, effective January 1, while no export tax has been levied on the metal of 99.995 purity that can be delivered on the LME. Analysts said the increased supply may depress zinc prices further in future, which more than doubled last year.

Following the international trend, zinc slab in the Mumbai non-ferrous metals market declined by 12 per cent to Rs 202 a kg on Monday compared with Rs 230 a kg in the beginning of the month.

The consumption pattern of zinc, largely used by the galvanising industry, has significantly changed over the years, as the galvanisers have started using low gauges of thickness on steel alloys to maintain the normal price level and profitability.

Zinc prices had touched a record $4,580 a tonne on the LME on November 10 and had become the second-best performing metal after nickel in 2006, as mine supplies could not meet the rising steel galvanisers' demand.

Meanwhile, the country's largest zinc producer, Hindustan Zinc, cut zinc and lead prices by Rs 1,000 and Rs 700 to Rs 187,000 a tonne and Rs 85,200 a tonne, respectively. This was the seventh price revision so far this month, with an overall downward revision of 12 per cent from Rs 212,200 a tonne in the beginning of January.