Zinc prices to cross all time high

05 December 2006

Zinc prices are likely to break the all time record of USD 4,619.50 they had set on the London Metal Exchange (LME) on November 24, owing to depleting inventory, reports Business Standard.

The total inventory in the LME-registered warehouses fell 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.

Meanwhile, the spot price touched USD 4,565 in early trade Monday amid fresh bout of demand from steel galvanisers.

In the Mumbai`s non-ferrous metal market, the price of zinc 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% of the global zinc production is consumed by the galvanized steel industry.

The rising demand for galvanized 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 that the global zinc market is facing a 1,67,000 tonne deficit during January and September this year.

The total reported stocks fell by 2,84,000 tonne during the same period while the proportion of total stocks held in LME warehouses fell from 47% at the end of 2005 to around 26%, the report said.

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

At present, the demand for galvanized 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, raised its basic prices by Rs 1,700 a tonne to Rs 2,30,500 a tonne from Rs 2,28,800 a tonne, effective Nov. 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.