The Hindu Business Line : Domestic zinc prices may rule firm next year

"Plenty of infrastructure projects are on now. All these require zinc, which is used for galvanising. Zinc will be in demand for telecom towers and cable trays in power projects," said Mr L. Pugazenthy, Executive Director, India Lead Zinc Development Association (ILZDA).

Most of the zinc consumed in the country is used for coating of steel or nickel products to prevent corrosion.

"Zinc is also used in coating tinplates, which are now being exported. It is also used in galvanised sheets that are used in bodies of transport and ducts in air conditioners," he said.

Though prices are likely to rule firm in the short to medium term, zinc producers will face problems raising it. The main reason for manufacturers facing resistance is that most of the infrastructure projects are being implemented by the Government agencies. "The Government agencies have fixed budgets and they will face problem raising it," said industry sources.

Zinc prices have increased over 60 per cent this year from Rs 50.50 a kg to Rs 83 currently. The rise in prices can also be attributed to the global trend, which has been witnessing a bull run in all metals.

On LME, zinc prices hit a 16-year high this month and are currently ruling at $1,790 a tonne, while the average price for this year is $1,370.

"Metal availability will be no problem. Our domestic production is set to increase this fiscal, with Hindustan Zinc doubling its capacity to four lakh tonnes in July," Mr Pugazenthy said.

Besides, Binani Zinc, the other producer, has a capacity to produce 38,000 tonnes a year.

Consumption could exceed 4.5 lakh tonnes. "Zinc consumption is likely to witness a 10-15 per cent growth annually in the next couple of years," industry sources said.

The gap in supply-consumption is met through imports and recycling.

"An interesting feature is that imports are declining," industry sources said.

According to Mr Pugazenthy, imports could decline to 30,000-35,000 tonnes this fiscal from around 50,000 tonnes last year. "Expansion of domestic capacity and recycling are factors that have led to decrease in imports," he said.

Last fiscal, Hindustan Zinc toll smelted zinc and brought 54,000 tonnes into the country.

"There are units which recover zinc from industrial wastes such as zinc ash, zinc dross. Such re-cycled zinc finds applications in hot dip galvanizing, manufacture of zinc chemicals," Mr Pugazenthy said.

The recycling industry produces 25,000-50,000 tonnes every year, depending on the market conditions, price and availability of recyclables.

In the next couple of years, the zinc industry sees demand rising as the work on widening and laying National Highways gathers pace. "Zinc will find use in coating of steel structures that will be used for bridges," the sources said.