The Hindu Business Line : Bearish trend in zinc to continue

According to the International Lead and Zinc Study Group, the global zinc production exceeded the demand by 72,000 tonnes in the first quarter of 2008. The world refined zinc usage in the quarter dipped 2.76 million tonnes (mt) from 2.79 mt a year ago, while the output remain stable at 2.84 mt.

In 2008, production is forecast to increase 6.47 per cent to 12.06 mt while the consumption likely to increase 4.7 per cent to 11.85 mt.

China factor

New mines that are expected to commence production this year include Sotkamo in Finland (capacity of 60,000 tonnes a year) and Penasquito in Mexico (1.35 lakh tonnes).

The demand for zinc in China is expected to take a beating on the back of economic slowdown.

According to the World Bank reports China is estimated to grow at 9.4 per cent in 2008, against 11.4 recorded in 2007.

The overall decline in China’s economy may lead to reduced zinc consumption and can further dampen the zinc prices.

China is the world’s largest producer of both mine (28 per cent of world production in 2008) and refined zinc (34 per cent).

The loss of zinc smelting due to the earthquake is about 3.5 lakh tonnes and production is expected to be down by around 20,000-30,000 tonnes, which is less than 1 per cent of China’s total output.

China’s investment in lead and zinc smelting sector surged by 126.43 per cent year-on-year to $40.80 million in the first two months of 2008, while in the lead and zinc mining sector it fell 12.26 per cent to $13.42 million, according to China Nonferrous Metals Industry Association.

Major projects

Major zinc projects that are coming on stream by the third quarter include Shaanxi Dongling Group’s 80,000-tonne zinc smelter, Yuguang Lead and Gold Group and Zhuzhou Smelter Group 1 lakh tonne each. The capacity expansion projects are likely to increase China’s refined zinc output by about 3 lakh tonnes to 4.05 million tonnes this year.

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