General Characteristics

Zinc is the fourth most widely used metal after steel, aluminum and copper in the world. Due to its resistance to non-acidic atmospheric corrosion zinc is instrumental in extending the life of buildings, vehicles, ships and steel goods and structures of every kind.

Zinc is a bluish-white lustrous metal. It is normally covered with a white coating on exposure to the atmosphere. Zinc dust is flammable when exposed to heat and burns with a bluish-green flame. Zinc also exists in many compounds. Zinc has a role in normal human growth, taste, and sperm development, but exposure to high levels of zinc through inhalation, ingestion, and dermal contact can cause adverse health effects.

Zinc is used for alloys, electroplating, metal spraying, electrical fuses, batteries, rubber, paint, glue and matches. Zinc is registered as a fungicide, herbicide, and rodenticide. The primary stationary sources of zinc are electric services, petroleum refining, crude petroleum and natural gas extraction, manufacturing of fabricated rubber products, manufacturing of fabricated metal heating and plumbing products, and manufacturing of inorganic chemicals. Indoor sources include infiltration of outdoor air, smoking, cooking, and other indoor sources. The average indoor concentration of zinc is normally slightly higher than the outdoor level. Zinc occurs naturally in the earth's crust.

Domestic Scenario

• The Indian zinc industry entered its transformation phase with the privatisation of the largest zinc producer, Hindustan Zinc Ltd, in favour of the Sterlite group in April 2002. The domestic zinc industry is now completely under the private sector and is in the midst of a serious expansion programme.
• By 2010, India is expected to attain complete self-sufficiency in meeting its zinc demand. Thereafter, the process of India becoming an important zinc supplier to the world would be initiated, provided that another phase of capacity expansion is effected.
• The country's zinc demand, which stood at 3.5 lakh tonnes in 2003-04, is expected to rise to 4 lakh tonnes in 2004-05, including imports 65,000 tonnes.
• Over the next five-six years, zinc demand is likely to grow at 12-15 per cent annually, against the global average of 5 per cent.
• Even if one assumes that zinc demand grows by 10 per cent till 2010 and at slower 7 per cent thereafter, India would require zinc capacity of 14 lakh tpa by 2020, in order to be self-reliant. The next round of large capacity additions would, therefore, be warranted from 2008 onwards.
• Buoyancy in domestic zinc demand primarily emanates from the boom in the steel industry, given that over 70 per cent of zinc is used for galvanizing. The steel industry has bright prospects with demand drivers being the construction industry and exports. Other sources for demand would be die-casting, guard rails for highways and imported-substituted zinc alloys.

Global Scenario
Substitutes: Aluminum, steel, and plastics substitute for galvanized sheet. Aluminum, plastics, and magnesium are major competitors as diecasting materials. Plastic coatings, paint, and cadmium and aluminum alloy coatings replace zinc for corrosion protection; aluminum alloys are used in place of brass. Many elements are substitutes for zinc in chemical, electronic, and pigment uses.

Factors Influencing Zinc Market

• Changes in inventory level at LME wharehouses
• Economic growth rate of major consuming countries
• Global growth and demand in major consuming industries
• Prices of the alternative metal(s)
• Participation of funds

Factor influencing demand and supply

• London Metal Exchange

IST of Global Exchanges (Price Clues from Other Major Global Exchanges)

LME: 5.30 PM to 10.30 PM

Due Date Rate Computation

DDR is calculated on the last day of the contract expiry, by taking LME cash prices of Lead in USD, multiplied by Rupee-USD rate as declared by the RBI on that particular day.

DDR = LME Cash Price (on the last day of contract) x INR/USD rate of RBI

Approximate MCX Contract Parity Price in INR on Normal Days Against LME Cash and 3M Prices

MCX USD Parity Price:
LME Cash Price + (LME 3M Price - LME Cash Price) * Remaining days to maturity/90

MCX INR Parity Price:
MCX USD Parity Price * INR/USD forward rate