Gold Silver Reports — Zinc Counter may See Profit-Booking — Investors may opt for profit booking in zinc as its price, which witnessed a rally since the beginning of this year, could dip if supply from Chinese mines continues to grow
.According to data from International Lead and Zinc Study Group, China’s mine output rose to a record 515,000 tonnes in June, an increase of 11% compared to last year.
The non-ferrous metal has gained 3.19% in August and nearly 50% since the beginning of 2016. Currently, zinc price is hovering around `154 per kg. But margins of companies that use zinc like batteries, automobiles and others have come under pressure as input costs have gone up.
But copper, the other base metal, is likely to be under pressure now as seasonal summer demand for the metal is over and there is am ple supply in the market. Prices dropped by 7% in the last month and analysts do not see any immediate trigger for a spike in price.
“Zinc is doing good on account of deficit in the global markets due to mining cuts announced by miners like Glencore last year. But the recent data of zinc production in China may have put a downward pressure on zinc and we can see some profit booking. However, margins of those industries that use zinc may come under pressure as its price has gone up.“
NO SIGNIFICANT IMPACT
Amritanshu Khaitan, managing director, Eveready Industries India, does not feel that the price hike in zinc will have a significant impact on their margins.“D-sized battery, where zinc is used, now constitutes only 10-12% of our production. There may be some marginal impact of the rally because it is being offset with ru pee strengthening against dollar. But if there is a spurt in pric es, which is unlikely in the near term, then as a branded player we have the option of passing on zinc price hike to our customers.“
The automobile industry uses zinc in a big way . “Zinc plating is much less expensive than other processes. But then, in percentage terms, total expenses of automobile companies towards non-ferrous alloy metals varies from 0.25% to a little more than 1% of the total raw material cost. Hence, we do not foresee a major dent in margins due to the current rise,“ said Neal Bhai, head of research at Skynet Trading Solutions. — Neal Bhai Reports