Zinc prices likely to breach record high

Zinc prices are likely to break the lifetime high record of $4,619.50 they had set on the LME on November 24, owing to depleting inventory.

The total inventory in the LME-registered warehouses fell by 375 tonne on Monday to 84,825 tonne, equivalent to not more than two days of global consumption.

"The inventory has touched the alarming low level with further room to fall, as there have been no hidden stocks of zinc unlike copper," a trader said.

Meanwhile, the spot price touched $4,565 in early trade on Monday amid fresh bout of demand from steel galvanisers. In the Mumbai non-ferrous metal market, however, the price of zinc ingot remained unchanged at Rs 345 a kg.

Usually, any price variation on the LME takes about 3 to 4 days to percolate to the metal prices in India.

About 65 per cent of the global zinc production is consumed by the galvanised steel industry. The rising demand for galvanised steel from the construction sector in the wake of strong infrastructure growth has taken the price upwards globally.

The higher price is supported by the low estimates of the World Bureau of Metal Statistics (WMS) in its latest bulletin, which said the global zinc market is in a 167,000 tonne deficit during January and September this year.

The total reported stocks fell by 284,000 tonne during the same period, while the proportion of total stocks held in LME warehouses fell from 47 per cent at the end of 2005 to around 26 per cent, the report said.

Goldman Sachs, however, presented a contrasting view on zinc prices saying that after touching the $4,600 mark, the price would start declining.

At present, the demand from galvanised steel sector looks strong, which would go slow once the price touches this level, an analyst said.

Meanwhile, Hindustan Zinc, the largest zinc producer in the country, has raised its basic prices by 1,700 a tonne to Rs 230,500 a tonne from Rs 228,800 a tonne, effective November 2.

The company may revise the price again, as the global zinc prices have gone up substantially since its last revision. The company revises prices as soon as the sustainable level of price movement is seen on the LME.

The company has also chalked out another expansion in its existing zinc production facility at an investment of Rs 777 crore.

Under the expansion plan, the company is set to add 88,000 tonne to its existing capacity and set up an 80 mw captive power plant. The whole project is likely to be completed by early 2008.