Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

In major markets for zinc including Delhi and Mumbai, prices for most grades fell in June as demand from end user remained dull and the markets operated at a less than 50pc capacity. 


Producers, buyers and traders had one thing in common — lower production capacity. The three-month official LME contract, however, climbed 5pc or $100/mt to $2,067/mt on June 26 from June 1, portraying a better demand for zinc primary metal coming from China and South Korea. 


However, in India, a slump in domestic demand pushed prices lower for dross, secondary zinc ingots and even zinc alloys. 

June was an unprecedented month where both, upstream and downstream players, were placed in a unique situation due to COVID-19 and gradual easing of lockdown. New strategies and business models had to be adopted as June 2020 could not be compared to previous months or the previous year. 


Towards the end of May, lockdown was lifted in India and most producers began production in June at a reduced capacity with hindrances in supply chain and lack of skilled labourers. This caused severe production disturbances. 


Galvanizer’s Dross


In the beginning of June, the index for dross for Delhi stood at Rs150,000/mt ex-works producer on June 1 which slipped by Rs3,500/mt and settled at Rs146,950 ex works producer on June 29. 


The spread has widened over the month showing weakness in the markets for galvanizers dross. Galvanizers in India that use primary metals for galvanizing revealed that they did not receive hefty orders for dross which slowly resulted in them lowering offers to meet market demand. 


Demand from zinc oxide makers remained low as several had cut production by 60pc in June with tyre industry operating at a much lower level compared to pre-COVID months. 


Traders in Delhi stopped buying dross material from galvanizers in the last week of June as they couldn’t sell their existing inventories at the desired amount and market price was deemed too low for them to sell. 


The index for Mumbai on June 29 remained flat at Rs146,117/mt ex-works producer from June 1 with better demand from zinc oxide makers in the west. Major zinc oxide companies are ramping up production to export goods. 


Going into July, galvanizers in Delhi are not receiving enough orders to galvanize steel which is resulting in low dross production. Construction activities are halted as migrant labourers have not yet returned to work. This is depleting dross with the galvanizers. The shortage of dross could result in prices moving slightly up in the coming weeks in Delhi. 


Galvanizers in Mumbai are receiving orders and have enough material to sell. This could result in prices being flat or slightly lower in the coming weeks. Market participants believe that July would be better in terms of demand as the market across zinc value chain is slowly ramping up production. Markets weakened throughout June as spreads for dross in Mumbai and Delhi widened by 6pc and 4pc, respectively.


The index for secondary zinc ingot fell in the beginning of the month in Delhi and improved towards the end of the month as trades improved. The index for Mumbai remained flat over the month.


Zinc Ingots


Demand for secondary zinc ingots fell in June as producers operated at 50pc capacity, which dropped by 10pc later, since galvanizers either found it difficult to work under COVID-19 restrictions or had to stop work unless demand for galvanized steel recovered. 


Small and medium enterprises were most hit by the pandemic leading to several galvanizers making heavy losses in the first quarter. 

Brass manufacturers of Jamnagar also reduced orders for secondary zinc ingot as demand from end users fell. Producers are finding it difficult to trace new buyers amid these uncertain times and were selling at lower prices to keep their business operational in June. 


Lack of cash flow and tremendous losses need to be covered, said ingot manufacturers in the North. The index for secondary zinc ingot in Delhi fell by a whooping Rs11,000/mt and settled at Rs154,950 ex-works consumer from June 1. Similarly, the index for Mumbai fell by Rs6,700/mt and settled at Rs152,950/mt from June 1. 


Market weakened in Mumbai and Delhi as spreads narrowed by 10pc and 11pc, respectively, though prices in Mumbai have not dropped too much compared to Delhi.

The Davis Index for galvanizer’s dross fell significantly in both Delhi and Mumbai


Going into July, market participants feel demand would improve but are cautious of ramping production as they do not want to fill their inventories. During monsoon, construction activities will subside and transportation becomes tricky. Market sentiments remain slightly dull as lockdown was extended for Maharashtra, West Bengal and the city of Chennai, which are the major markets in India. 

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