The sluggish auto sector in India has been hit further with the global spread of COVID-19. A halt in production by most automakers has impacted not only the demand for ferrous metals but also zinc alloys like Zamak #3 and #5. These alloys are used in the production of automotive components like engine parts, engine covers, crankcases, cylinders, braking systems, seatbelts and steering wheels.
Zamak can be produced from primary metal and zinc scrap. In India, die casters prefer Zamak made from primary zinc metal with 99.99pc virgin metal which offers better quality. But in absence of demand in the auto sector, die casters have halted production. With the fall in downstream demand, alloy producers have shut operations. A few plants are operational at a reduced capacity. Producers of Zamak believe demand could take a while to recover even after the markets reopen.
Besides demand, Zamak market also depends on the prices of primary zinc, often driven by the rise and fall in LME zinc. The three-month LME zinc contract settled at $1,822.5/mt on March 23, down by $610/mt from $2,432.5/mt on Jan 21. Primary zinc prices reduced by Rs31,000/mt in the same period to Rs166,00/mt from Rs197,000/mt. Alloy prices too were on a downtrend. On March 23, the Davis Index for Zamak #3 and #5 both declined by Rs23,000/mt to settle at Rs179,000/mt and Rs182,000/mt, respectively, from Jan 21.
Even before the outbreak, demand for Zamak as the auto sector struggled with low demand amid the production switch to BS-VI compliant engines. Market participants now wait for relief measures by the government.