Zinc futures prices are expected to fall further in the short term as there is surplus global inventory supported by resumption of mining operations in China which were closed down due to the recent earthquake.
In just one week, Zinc futures prices on MCX have weakened nearly 8% to quote Rs 92 per kg from previous week?s level of Rs 100.50 per kg on some selling pressure on reports of global surplus of the metal, market sources said. The total global surplus for 2008 is estimated at around 210,000 tonne.
The latest monthly bulletin of International Lead and Zinc Study Group (ILZSG) shows that the world zinc market was in surplus by 72,000 tonne in the first quarter of 2008.
?In the United States, rising demand for galvanized steel in non-housing construction is expected to offset lower demand from residential construction associated with the downturn in the housing market,? according to an analyst with Karvy Comtrade.
The report showed that global refined zinc use dipped to 2.767 million tonne from 2.778 million a year earlier and the refined zinc output was 2.839 million tonne, barely changed from 2.837 million tonne a year earlier.
World zinc consumption is forecast to increase by a further 4.70% in 2008 to 11.85 million tonne. Growth in vehicle production in China and India is expected to remain strong, resulting in increased demand for galvanized steel sheet used in the bodies of cars and trucks.
In 2008, production is forecast to increase by another 6.47% to 12.06 million tonne.
A number of new mines are expected to commence production during the year, including Sotkamo in Finland (capacity of 60,000 tonne a year) and Penasquito in Mexico (capacity of 1.35 lakh tonne a year).