Zinc: Unlikely Price Hike in 2017 to Support Indian GP/GC Market

Domestic producers of galvanised plates and sheets can hope for a better year ahead with the price of zinc, an important raw material, is unlikely to increase further in 2017 after going significantly northwards in the last two months, according to rating agency ICRA.

Mostly driven by sentiment, zinc prices quoted at the LME rose by around 8% since September 30, ICRA said, adding that the industry’s fundamentals, which could have justified this upturn in prices, have not experienced any significant change during this period.

The price rise for the first nine months of the year was mostly due to the demand-supply mismatches. During this period prices zoomed by around 53%, sharpest among the base metals as the supply deficit was also the highest. ICRA now senses the possibility of a better supply which will, in turn, help prices to stabilise.

Price stabilisation would mean better margin for both major producers such as SAIL, RINL and Tata Steel as well as secondary producers. However, costlier steel may spoil the party for the “other” producers. Domestic firms are planning to raise the price of flat products by INR 3,000/MT to offset thee cost push arising out of costlier coking coal from the beginning of January.

India has been doing well in galvanized products by docking around 20% of its annual production in various countries. During the April-October period of the current fiscal, GP/GC products’ contribution was the highest from the flat steel export basket. Domestic sales also grew by nearly 12% in 2015-16 to 62 lakh tonnes from 55.54 lakh tonnes in the previous fiscal.

Production of these products is on the rise. “Other” producers, which used to traditionally produce more of these products than their “major” counterparts, are gradually seeing a decline in their contribution in the whole kitty mainly because “majors” have enhanced capacity.

GP/GC sheets/coil

Fig in lakh tonnes
Source: Joint Plant Committee