The fast-paced spread of COVID-19 in India could suppress zinc demand in the coming months and even limited mining operations could leave a surplus, said Yash Sawant, commodities analyst at Angel Broking, in an interview to Davis Index.
What is your view about the Indian zinc market?
Zinc prices have dipped over 12pc from Jan 2020, on the Multi Commodity Exchange of India. Going ahead, zinc prices might remain under pressure as the economic blow due the pandemic has shattered global growth prospects. Moreover, fresh tension resurging between the US and China might further deter the demand outlook for industrial metals. Many nations have started gradually revoking the virus-related lockdowns, however, the road to recovery could stretch till the end of the year.
Could India’s annual demand deteriorate as an effect of the pandemic?
COVID-19 is spreading at a very fast pace in India which might keep the demand muted in the coming months. Many major zinc mines were shut down since late March 2020 as a measure to curb the spread of the pandemic. Hindustan Zinc (reported output of 690,000mt in 2019) also had to shut their operating activities in compliance with lockdown to combat COVID-19. However, in April they resumed mining and smelting operations at limited capacity. Even a slowdown in production activities will leave a massive surplus on the table as the demand prospects continue to remain weak.
India’s annual demand for zinc is around 700,000 – 800,000mt out of which more than 70pc is supplied by Hindustan Zinc Limited majorly to the steel segment. Steadily rising supply amid fragile global and domestic demand prospects might keep zinc prices under pressure. Demand might be underpinned until a concrete cure is found for the implacable virus.
A global outlook for the zinc and base metals amid COVID-19 pandemic
Mining activities in major zinc producing nations like Peru, India, and Bolivia were shut in an attempt to contain the pandemic. However, many nations have started revoking the virus-related lockdowns and gradually resumed with economic activities. Even miners in Peru and Bolivia are set to resume their operational activities gradually in May 2020 which might increase global supplies.
Major central banks have been rolling out aggressive stimulus plans to counter the economic blow dealt by the pandemic. The financial stimuli have raised hopes of a recovery and in turn, provided some support for industrial metal prices. However, demand prospects might remain clouded until a vaccine for COVID-19 is found. No signs of concrete recovery in demand for base metals and uncertainties surrounding the US-China trade relation is expected to keep market participants cautious.