Zinc prices go up 5% on rising demand

Robust global demand, coupled with falling inventory, helped boost zinc prices by 5 per cent in the Mumbai non-ferrous metals market on Tuesday over the previous day's prices. The prices settled at Rs 241 a kg on Tuesday, witnessing a gain of more than 25 per cent in the last one month.

On the London Metal Exchange (LME), zinc settled at $4,582 on Tuesday with a gain of $162 over the previous day and a rise of $1,181 or about 32 per cent from the prices of October 1.

The inventories on the LME-registered warehouses slipped by 1,800 tonne at 99,550 tonne on Tuesday as against 1,39,125 tonne on October 2.

The global upsurge in zinc began when copper started settling down between $7000-8000 a tonne on the LME. The copper prices showed no sign of crossing the limit amid rising investment demand and institutional investors' interest in the red metal.

The inventories of copper have started moving gradually up, thereby forcing the prices to move in a close range.

Therefore, the other market mover on the LME, the zinc, started heating on strong fundamental support.

"Zinc is treated as a pick-and-choose metal throughout the world, which enhances possibilities of the metal to be liked by investors," an analyst said.

Apart from the rising global demand from the consumer industries, including construction, toys and others, the domestic demand is growing in the wake of construction boom in the coming months.

"Today, the demand for galvanised steel is higher than carbon steel, especially for the construction sector. As about 70 per cent of the zinc produced in the country is consumed by galvanised steel, the demand for zinc is anticipated to go up," the analyst said.

The rising zinc prices on the LME is mainly attributed to continuous deficit forecast in 2007. According to an official of a diversified Canadian mining company, Teck Cominco, the zinc market will see a deficit of 315,000 mt in 2007.

"The zinc stocks have reached an alarmingly low level, which is not even 2 to 3 days of global consumption. The global zinc market will be in its fourth consecutive annual deficit during 2007 on the back of strong demand growth, the official said.

The rapid fall in inventories and lack of supply could become so severe that it can curtail consumption.

The fundamentals for zinc remain strong, as China, the world's biggest consumer of zinc, is expected to see its demand top 4.4 mt in 2010, averaging a yearly growth of around 7.4 per cent, according to sources in China.

The Indian zinc demand in the current year will be rising at least 8 per cent to 4,55,000 tonne, well ahead of what domestic producers of the metal will be able to produce.