Zinc seen near $1,500 a tonne in short term Production likely to be constrained by financial crisis

Print this page Posted on : 05-30-2009 by recycleinme.com

Longer-term, production will likely be constrained by the current financial crisis, which is limiting the ability of producers to expand output.

Dow Jones

London, May 29

Zinc prices will likely remain near $1,500 a tonne in the near term, the chief executive of Vedanta Resources PLC told Dow Jones Newswires.

Limited ability

Longer-term, production will likely be constrained by the current financial crisis, which is limiting the ability of producers to expand output and having long-term implications for prices, its CEO, Mr M.S. Mehta, said in a telephone interview. ''Zinc in the near-term should be governed by the marginal cost (of production),'' said Mr Mehta, adding the industry's marginal cost is around $1,500/tonne.

Vedanta is one of the world's largest integrated zinc producers through its 64.9 per cent-owned Hindustan Zinc Ltd, held by its fully-owned subsidiary Sterlite Industries Ltd.

HZL is rapidly expanding its zinc and lead capacity and plans to have a zinc-lead capacity of 1.065 million tonnes by mid-2010, up from 754,000 tonnes now, Mr Mehta said.

Cost of production

HZL produced 552,000 tonnes of refined zinc and 60,000 tonnes of refined lead in the 2009 financial year that ended in April. HZL's cost of production was $710/tonne at the end of the 2009 financial year. HZL plans to reduce that to $600/tonne by the end of the 2010 financial year, making it one of the lowest cost producers in the world.

Mr Mehta said the company doesn't plan to reopen its 80 per cent owned Malco aluminum smelter or the closed capacity at its Balco I smelter in the near term. ''We don't see a restart immediately.'' Both facilities are in India.

The company instead is using the closures to sell excess power into the energy market, Mr Mehta said.

Mining at its new Niyamgiri bauxite mine in the northeastern Indian state of Orissa is still on track, with first mining to begin in September 2009 once a five-km conveyor between the mine and its Lanjigarh refinery is completed, Mehta said.

Source : Business Line