The zinc market has witnessed a remarkable upturn, with prices climbing steadily to Rs 289.6 per kilogram. Moreover, this surge stems from China’s economic stimulus measures and growing supply concerns in global markets. Consequently, the International Lead and Zinc Study Group now predicts a substantial deficit of 164,000 tonnes in 2024. Furthermore, this dramatic shift from an expected surplus has intensified market pressure.
Rising industrial demand, particularly from green energy and battery technology sectors, continues to drive zinc consumption. Additionally, India’s rapid infrastructure growth and record-breaking steel production have created unprecedented demand. Meanwhile, the automotive industry’s increasing need for galvanised steel has further strengthened market fundamentals.
How Does Hindustan Zinc Plan to Capitalise on Rising Zinc Prices ?
Hindustan Zinc has unveiled an aggressive $2-2.5 billion expansion strategy to capitalise on market opportunities. Specifically, the company aims to double its metal production to over 2 million tonnes. Therefore, this comprehensive plan includes expanding zinc, lead, and silver production capacities.
The company has engaged international consultants to develop mine expansion strategies. Subsequently, they plan to appoint global contractors by November-end for mine development. Meanwhile, the expansion will utilise both internal resources and debt financing.
For FY25, Hindustan Zinc targets mined metal production of 1.2 million tonnes. Additionally, they project refined metal output of 1.075–1.1 million tonnes. However, analysts at Systematix suggest that current market prices fully reflect the company’s growth trajectory.
The expansion focuses heavily on the Zawar mine, which offers substantial virgin resources. Nevertheless, the company maintains flexibility in production distribution across its six Rajasthan-based mines. Furthermore, this strategic approach allows optimal resource utilisation.
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Hindustan Zinc’s Financial Performance
In response to favourable market conditions, Hindustan Zinc reported impressive Q2FY25 results. Subsequently, the company achieved revenues of Rs 8,252 crore, marking a 21.5% YoY growth. Additionally, operating profits reached Rs 4,123 crore, demonstrating a robust 31.3% increase from the previous year.
The company has successfully reduced its production costs to $1,071 per metric tonne. Therefore, this 5% year-on-year reduction in costs has bolstered profit margins. Furthermore, operating profit margins have improved to 50%, up from 48.5% in the previous quarter.
Market forecasts indicate continued strength in zinc demand, particularly from China’s infrastructure and green energy sectors. Subsequently, global zinc demand in solar power applications is expected to grow by 43%. Meanwhile, the wind energy sector anticipates doubling its demand within six years.
Despite positive market conditions, Hindustan Zinc faces potential challenges. Specifically, these include raw material constraints and global market volatility. However, the company’s reduced production costs provide a buffer against market fluctuations.
The company’s export strategy remains adaptable to market conditions. Nevertheless, they maintain a strong focus on domestic market opportunities. Additionally, India’s growing infrastructure needs continue to provide stable demand.
Regulatory oversight remains stable, with no immediate risks to current operations. Furthermore, the company’s dominant market position in India provides competitive advantages. Meanwhile, their integrated operations offer resilience against supply chain disruptions.
Written By Fazal Ul Vahab
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