HZL slashes prices by Rs 200 on global rate dip

Price cut comes after four upward revisions on the trot

Hindustan Zinc (HZL) has cut zinc selling prices by a meagre Rs 200 a tonne across all its product categories, effective immediately. This move, prompted by continuous downturn in zinc prices in the international market, came after its four upward revisions on the trot.

This paltry price fall is mainly attributed to a drastic fall in the zinc prices on the London Metal Exchange, where the prices slumped to $2,115 a tonne on Monday, from $2,302 on February 1. Inventory too fell in tandem at 3,58,550 tonne on Monday from 3,70,800 tonne on February 1.

This is the second revision of the month. Effective February 1, the company had raised zinc prices by Rs 7,900 a tonne on the back of price hike at the LME.

Following the price cut, special high-grade zinc is currently quoting at Rs 1,24,500 a tonne (ex-Debarihanderia), while high-grade zinc is selling at Rs 1,24,300 a tonne. Prime western zinc is quoting at Rs 1,22,500 a tonne.

"This (the price cut) is to check escalating zinc prices, as the downtrend continues in the international market. The prices in India are still on top," a zinc trader said. Hindustan Zinc has been hiking its zinc selling prices uninterruptedly since the start of the boom in the international market.

Since the beginning of the current year, it has raised its prices by 18 per cent amid rising international prices, on the back of supply crunch and production dirsuptions at major zinc-producing centres throughout the world.

At the same time, lead prices too surged about 9 per cent to Rs 68,400 a tonne.

A favourable factor for overcoming the current lean period is that the warrant has declined to 1,87,350 tonne from 2,03,750 tonne on February 1.

Zinc supply tightness, however, is expected to ease once the suspension, effected after flooding, of 145 zinc warrants stored in the LME New Orleans warehouses, is lifted.

A section of traders said this suspension would hit the spot prices as delivery of metal would be made possible from these centres. But, the bullish trend could continue owing to rising demand from the developing countries including India and China.

Partly attributing the present decline in the international zinc prices, a local trader said every single development now affects the movement of local prices.

Mexican miners reached a wage agreement with Industrias Penoles SA and called off a strike at the company's lead and zinc mine in northern Mexico. Strike-hit Naica complex produces 26,767 tonne of zinc concentrate and 22,586 tonne of lead concentrate a year.

Hindustan Zinc, the largest producer of zinc and lead in the country, produces zinc at an annual capacity of 4,00,000 tonne. It has commissioned a 50,000-tonne a year lead expansion project at its facilities in Chanderiya. The company expects to achieve the full capacity by mid-2006.

Lead concentrate required for the expanded smelter will continue to be sourced from Hindustan Zinc's captive mines. With this expansion, lead capacity will increase from 35,000 to 85,000 tonne a year.

However, overall, lead and zinc are gaining momentum on supply concerns despite slowdown in demand in the domestic market.

The international zinc prices are expected to remain high in 2006 owing to supply shortage in major producing centres. Zinc inventories are expected to remain critically low in 2006, despite new products that will add an estimated one million tonne a year to global supply between 2005 and 2007.