Vedanta-owned Hindustan Zinc Ltd (HZL) reported a consolidated net profit of ₹2,680 crore, up nearly 33 per cent, YoY. Revenue from ops grew by over 36 per cent YoY to ₹8,336 crore, on account of higher refined metal and silver volumes, gains from strategic hedging, zinc prices, and favourable exchange rates.
In an interview with businessline, Arun Misra, the CEO of HZL, talks about the outlook, global supply situation, movement of zinc prices, among others.
Excerpts:
What is the macro-economic outlook?
Factors impacting demand (for zinc and other base metals) include rising interest rates and higher energy prices; inflation leading to decline in consumer and business spending and higher input price and supply constraints. On the supply side, there are reports ofEuporean smelters being put into care and maintenance due to increasing energy prices.
Zinc inventories in LME warehouses witnessed a steep decline of 61 per cent from the start of FY23; while lead inventories in LME warehouses dropped by 15 per cent from beginning of the fiscal.
Lead residue from zinc smelters is lower in Europe due to zinc smelters’ curtailment.
And in India?
Domestic zinc demand was stable in H1 FY23. Structures, pipe and alloy segments witnessed robust growth as project orders- which were stalled earlier - have resumed. The domestic lead demand remains strong and is supported by automotive demand, especially heading into the festive season. The industry battery segment is also robust on the back of replacement demands from data centres, banks, and ATMs. Silver demand witnessed an uptick owing to lowering of prices and festive season.
Any indication on price movement?
Zinc stocks are at an all-time low, there are supply-side constraints and there are no new mines coming up in the immediate short run. So, prices are bound to go up. There is a school of thought that says shortages could lead to price rising to around $ 3700 per tonne. And there is another which believes that the world would come to terms with new realities and in all likelihood – maybe another quarter down the line - zinc prices would stabilise to $3100 per tonne levels.
If you ask me, both situations are possible given the global turmoil.
In India, we follow LME-indexed prices. Prices are around $3000 per tonne. And in the short term, it could go up to $3100 per tonne. But, I do not expect any immediate volatility in price. So I guess, the average price would continue to be at $3000 per tonne for the quarter.
Our run rate indicates that we are on track for our guidance - mined metal production around 1,050-1,075 kt and refined metal production in the range of 1,000-1,025 kt.
What is the situation on supplies from Coal India?
As far as Q2 was concerned, supplies were better than Q1. However, supplies are still below our expectations. We expect 30 per cent of blending (of domestic coal and 70 per is imported thermal coal) and accordingly that amount is to be supplied by Coal India.
However, as we speak, numbers are moving up; and we hope by December-end, this number will improve to 25-26 per cent versus 14-15 per cent in the previous quarter.
Right now, there is a backlog of 50 per cent in Coal India’s supplies to us. But, we are being told that the miner is ramping up production. The monsoons did slow down production. But as the situation changes, we expect to get our full quota of supplies by November or December.
As the coal supply situation changes, that is as more domestic coal comes in for blending, we will see margins improve.
Are you in talks for new mines?
We are interested in bids for new zinc or copper mines near Rajasthan, Madhya Pradesh, or north Maharashtra; or nearby places to where we have our existing mines. In fact, we will look at options across base metal mines. Once the Centre puts up mines on the block, we will be interested in placing bids and taking a look at them.
Any capex plans?
Our project capex for the year is expected to be in the range of $125-150 million.