Assured prospects for zinc industry

By Ramnath Subbu

MUMBAI, APRIL 16. The sustained uptrend in the London Metal Exchange (LME) price of zinc and a commensurate rise in domestic markets with a pick up in demand from the user industries - mainly galvanising (steel), - have been good news for the Indian zinc industry.

The domestic industry is well insulated against imports as the international price of zinc is $1,132 a tonne this month having reacted from $1,184 in December 1999. This is still significantly higher than the $932 level in January 1999. The price had improved on strong demand from the U.S. and China. The upswing has been attributed to the upturn in fortunes of the world steel industry. Domestic prices of zinc too have been steady above Rs. 85,000 a tonne levels since August last having peaked at Rs. 90,030 in January this year and are in fact around Rs. 88,000 now.

India's per capita consumption of zinc at 0.2 kg is among the lowest in the world. With increased pace of industrial activity, consumption is expected to increase significantly over the next decade.

Since the galvanising sector is the major user of zinc, the future prospects for the industry depend on this sector. In industrialised countries, thin coated galvanised sheets are used in the automobile industry.

Hindustan Zinc (HZL) in the public sector is among the better managed public sector companies and is the largest and only primary producer of zinc. This monopoly status is unlikely to be disturbed in the future and the company controls all Indian zinc deposits. The private sector company, Binani Zinc, the other major player, has a capacity of 30,000 tonnes against 1.52 lakh tonnes of HZL.

China is the largest producer of zinc with a total refined output of over 1.4 million tonnes. In production terms, it accounts for about 15 per cent of the global output. It is also a major exporter of zinc.

As India continues to import 20-25 per cent of its zinc requirements, both HZL and Binani are planning expansion of their production capacities.

HZL is planning to do away with its uneconomic operations, expand its capacity and diversify into other areas in order to bring down the dependence on zinc to help combat the cyclicality in its prices.

The company has chalked out aggressive expansion plans. Its Rs. 2,500 crore expansion plans envisage adding 10,000 tonnes capacity each at its zinc smelters at Debari and Vizag and setting up a greenfield plant. The Rs. 1,150 crore one lakh tonne new smelter being set up in Rajasthan is to be commissioned in 2003-04. By then the demand-supply gap is expected to have reached 1.5 lakh tonnes domestically.

HZL is diversifying through a joint venture with BMRG of France and Vietnam Rare & Precious Minerals Corporation to explore and develop gold mines in Vietnam. It is also working on nickel extraction technology with the CSIR to initiate indigenous nickel demand which is being entirely met through imports. The company is also planning a joint venture at a cost of Rs. 300 crores with Rashtriya Chemicals & Fertilisers and Rajasthan State Mining Corporation to make di-ammonium phosphate (DAP). HZL is to supply sulphuric acid from the Rajasthan smelter and the greenfield smelter to this refinery.

The company is on the priority list of companies identified by the Government for disinvestment. Already, the Government has divested 24 per cent of its holding and may disinvest another 25 per cent bringing its stake down to 51 per cent.

The company will get a further boost from the discovery that the Agucha-Rampura mines in Udaipur (Rajasthan) have more than 12 per cent metal content compared to the world average of 9 per cent and the Indian average of below 2 per cent.

It will be increasingly source its ore from these mines.

Binani Industries on expansion drive

The private sector Binani Zinc plans to double the capacity to 60,000 tonnes along with a captive power unit of 25-30 MW at a cost of around Rs. 350 crores. The expansion is likely to be completed by the year end. In the second phase, BIL envisages further expansion to one lakh tonnes by 2003. The company was earlier contemplating a greenfield smelter in Gujarat but has decided against it.

The company is in the process of installing an environmental management system and this is expected to be in place by June 2000. While it produced 31,176 tonnes of zinc in 1998-99, production for the period April-December 1999 has been 21,204 tonnes.

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