Zinc prices are expected to remain range-bound at a “remunerative” $3,100 – 3,300 per tonne in the immediate future following strong demand from the auto sector, both in India and abroad – primarily in the European market, said Arun Misra, CEO of Vedanta-owned Hindustan Zinc Ltd, and also the Chairman of International Zinc Association (IZA).
According to him, smelters across Europe are cutting back production because of ‘the crippling’ high energy prices. Moreover, larger zinc producers like Nyrstar – the Netherlands-based company and the world’s biggest zinc producer – have paused output till further notice.
Larger European steel producers are idling blast furnaces too.
“As a result, there is some demand coming in from these markets – like in the auto sector, where galvanised steel offerings would need zinc. There is a good opportunity in serving those markets. With Nyrstar cutting back production, there is demand that larger exporters would target. So prices, which fell from $4,000 per tonne to around $3100 per tonne, are firming up. They are range bound in $3,100 – 3,200 per tonne segment. And we wouldn’t be surprised if they touch $3,300 per tonne in December,” he told Businessline during an interview.
In India, there is a strong demand recovery from the auto sector with orders rising again. Galvanisation of railway lines has potential to generate additional consumption here.
“It’s the flats – galvanised offerings – which are driving numbers and there is enthusiasm. Festive season bookings have been good. Railway line galvanisation has not yet taken off. If that happens then another 50,000 – 60,000 tonne of additional demand is expected in India,” Misra added.
“Overall, zinc consumption is expected to grow at 2.5 – 3 per cent per annum, it is presumed, as against the previous forecast of 5 per cent. “India is expected to see a 3-odd per cent growth in zinc consumption. The guidance here does not change,” he said.
Coal availability in India
Misra’s Hindustan Zinc is the largest supplier with a market share of 75 – 85 per cent; the remaining is catered through imports from countries like Korea.
According to him, an improving power generation scenario here – which in turn leads to better availability of coal for the company’s smelters – is seen as a positive. “Linkage commitments have improved and supplies from Coal India are getting regularised. Against one – two rakes of coal, numbers are now up 9 -10 rakes, which bodes well for us,” he said.
The company does have “high cost imported coal” in its stock which it will be mixing with “relatively lower cost” domestic coal – prices are lower by at least 10-15 per cent – to manage costs.
“We will produce more than one million tonnes of zinc this year, as has been our guidance for FY23. Cost pressures are there. But prices remain remunerative,” Misra said.
September 24, 2022