In focus / ZINC
business-standard.com
China to lead global demand surge
Sangita Shah in Mumbai
Published : July 19, 2003
The manufacturers of zinc in the country are set to raise the prices beginning August as the prices of the metal have shot up to a year’s high on London Metal Exchange (LME).
The domestic manufacturers will benefit from the higher international prices as the domestic prices are pegged to LME prices.
Zinc prices recently has been moving upwards on the London Metal Exchange. The spot price of zinc moved to a near year high crossing $ 800 a tonne to close at $ 833 on Wednesday from $785 on July 1. It had hit a year’s high of $852 on Monday on the LME.
India is facing a shortage of zinc as domestic demand is far in excess of supply.
At the same time, international prices have shot up. Though both the domestic producers Hindustan Zinc and Binani Industries have plans to raise capacities, they will not be able to completely match the demand.
If anything, zinc demand in the country is all set to soar with the revival of steel industry almost after a decade. Steel industry is the largest consumer of zinc accounting for almost 75 per cent demand of zinc.
Of this, majority of demand emanates from units engaged in galvanising steel to make it rust proof.
Moreover, with infrastructure projects picking up in the country, demand from the construction sector is increasing.
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.
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. Though the current demand supply gap is met through imports and recycling of waste.
The recent uptrend in the international market for zinc has been caused by a sharp rise in demand from China. China’s share of global consumption is about 19 per cent of total global demand.
This is expected to rise further over the medium term as its zinc consumption will be driven by infrastructure development and rapid industrial growth. The rise in demand will be greater than in the current year, industry experts said.
On the other hand zinc demand in countries other China is also likely to grow strongly from 2004 as world industrial production recovers and demand-supply conditions improve, the Australian Bureau of Agricultural and Resource Economics said in its latest forecast issued Monday.
Known also as Abare, the agency projects the London Metal Exchange cash zinc price to average $890 a metric ton in 2004, a 12.7 per cent increase from 2003’s forecast of $790/ton.
Over the last few years, zinc prices plunged to historically low levels after being hit by falling demand and supply surpluses.
However, cuts in mine production capacity in 2002 - amounting to around 450,000 tons - are starting to have an impact on smelter output, Abare noted.
But in 2004, world zinc metal production is likely to rise 2 per cent to 9.8 million tons as consumption recovers and zinc prices strengthen, it said.
As for consumption, Abare forecasts world demand to rise about 4 per cent to 9.47 million tons in 2003, still leaving the world market in a supply surplus, before tilting to a slight deficit in 2004 as consumption rises another 4 per cent to 9.85 million tons, agencies reported.
In the first half of 2003, there was a spate of permanent and temporary smelter closures as profits were eroded by a combination of low treatment charges (a response to intense competition for reduced supplies of concentrates) and low zinc prices, it said.
Miners pay smelters treatment charges to refine mine output, or concentrate, into metal. As concentrate availability falls, smelters have to lower treatment charges to attract miners to supply concentrate.
Abare said that announced smelter capacity closures so far in 2003 amount to around 317,000 tons, most notably the Avonmouth smelter in England and the Noyelles Godault facility in France. |
