Zinc rally set to last amid rising demand

Metal gains about 22% in the past year with prices expected to rise to about $3,000 a metric tonne

The rally in zinc prices has the potential to jump this year to levels not seen in a decade as demand continues to outstrip supply amid mine output disruptions, according to Hindustan Zinc Ltd, Asia’s biggest producer by market value.

Prices may rise to about $3,000 (Dh11,000) a metric tonne on the London Metal Exchange in the next couple of quarters, Sunil Duggal, chief executive officer of the Vedanta Ltd unit, said in a phone interview from Udaipur in Rajasthan. The last time prices hit that level was in 2007, according to data compiled by Bloomberg.

Zinc, used to galvanise steel, has spearheaded an advance in base metals, gaining about 22 per cent in the past year, as production cuts by Glencore Plc and other producers helped spur shortages. Higher prices and an increase in output saw Hindustan Zinc on Thursday report an 81 per cent increase in net income to Rs18.8 billion ($292 million) in the three months to June.

Even after a 60 per cent increase in prices in 2016 that made zinc the year’s bestperforming industrial metal, miners in China have been struggling to make up for falling global output seen after the closure of large mines in Australia and Ireland and a move by Glencore to suspend a portion of its production in late 2015.

Lack of visibility on Glencore restarting its stalled operations should also support prices, Duggal said. The Indian company, which has seen its shares surging 45 per cent in the past year, has five zinc and lead mines in its home state of Rajasthan, with total reserves of 390 million tonnes.

Hindustan Zinc is targeting a zinc and lead mined metal capacity of 1.2 million tonnes by 2020, and its parent has accelerated investments in its Gamsberg zinc project in South Africa, which is expected to produce its first ore in mid-2018. Sensex (IN)