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Gold/Mining/Energy : ZINC The base metal. News and Views. Symbol Zn -- Ignore unavailable to you. Want to Upgrade?

To: jack hampton who wrote (165)	4/5/1999 1:27:00 PM
From: jack hampton	Read Replies (1) \| Respond to of 3270

The view from India.. Prices seen stalling Date: 05-04-1999 :: Pg: 01 :: Col: a Suresh Krishnamurthy BL Research Bureau DESPITE boasting of fundamentals that are much better compared to other base metals, the international price of zinc is expected to remain weak in the first half of 1999. The prices have decreased significantly in 1998 as compared to that in 1997. Cash settlement prices on the LME averaged $1,023 per tonne in 1998, a decline of 22.1 per cent from 1997, and are currently ruling even lower at $991 per tonne. There are a couple of reasons for the sharp decline in prices in 1998. For one, the decline in prices appears exaggerated due to the Chinese factor. In 1997, prices shot up as Chinese producers were wrong footed in the futures market. Though the rise in prices proved to be a short-term phenomenon, it pegged average prices for 1997 higher. At the fundamental level, despite near stagnant demand, global output of refined metal rose by around 3 per cent in 1998. Even a substantial decrease in exports from China did not help as it was more than offset by increased shipments from CIS countries, contributing to a fall in prices. The outlook for 1999 looks equally uncertain. According to the International Lead and Zinc study group, consumption of zinc in 1999 is expected to rise by 3 per cent worldwide. However, the study group expects refined metal output also to grow. It expects the increase in output to be of the order of 2.1 per cent globally. It also estimates the exports from the eastern countries to the West to be of the same order. This may lead to a possible surplus and prices may, as a consequence, remain range- bound at current levels. Still, the outlook for zinc prices continues to be laced with uncertainties. For one, at current prices of below $1,000 per tonne, most of the smelters worldwide are expected to make losses. If these prices force production cut-backs, then prices may strengthen. In contrast, increased refined metal output from unexpected quarters may put pressure on prices. For one, Japans's imports are expected to decline in 1999 due to a considerable increase in output from local smelters. Overall, prices are seen stalling at current levels in the near term. For Indian producers - Binani Industries and Hindustan Zinc - the depressed international prices are likely to impact on revenues for the second year in succession. In 1998, Hindustan Zinc managed to partly offset the impact of reduced prices by increasing the output of refined metal. Even if Hindustan Zinc increases volumes in 1999, it may have to contend with intense pressure on operating margins. In the case of Binani Industries, the expected reduction in treatment charges for processing zinc concentrates into metal is an added concern.