But recent hike in zinc price not having fundamental ground as demand from galvanized steel sector, where Zinc is used primarily, remain dull. And recent rally in zinc solely due to short term supply shortage as large amounts of metal getting locked up in warehouse financing deals creating artificial tightness and elevated premium, which expected to be negative for the near term. However, in long run future it is likely that Zinc prices will remain smooth and will bounce back from the supports.

Visibility of next growth phase is emerging

Volumes of Zinc, Lead and silver are expected to remain strong in coming quarters due to gradually recovering mine metal production. The Rajasthan-based company board has approved next phase of growth plan to increase mined metal production capacity to 1.2 million tonnes per annum (MTPA), involving a capex of USD1.5 billion in 6 years. The plan comprises of developing a 3.75 MTPA underground mine at Rampura Agucha and expanding Sindesar Khurd mine from 2 MTPA to 3.75 MTPA, Zawar mines from 1.2 MTPA to 5 MTPA. The growth plan will increase mined metal (MIC) production capacity to 1.2 MTPA.

Valuation attractive

Valuations of the Zinc & Lead companies are attractive due to positive metal price. Financing deals that helped the Zinc metal big time in 2012 is expected to assist in 2013 as well. Even as galvanizing demand remained lackluster, financing deals with Zinc as collateral zoomed the spot demand last year. Meanwhile growth in Lead prices gaining support on supply shortage and surging demand for the batteries that used in everything from mobile-phone towers to cars. Zinc & Lead is expected to continue moving higher but this time the acceleration will be further more.

Zinc & Lead: Global Demand Forecast

International Zinc & Lead Study Group projected during ILZSG 57th session held in Lisbon on 11-12 October 2012 that the global usage of refined lead metal is expected to increase by 3.4% to 10.80 million tonnes in 2012 and by a further 3.3% to 11.15 million tonnes in 2013. On the other side, ILSZ forecasted global refined zinc usage is to decline slightly by 0.3% in 2012 to 12.71 million tones followed by a 3.8% increase to 13.19 million tonnes in 2013.

Global refined zinc production is forecast to fall by 2% to 12.86 million tonnes in 2012 and then rise by 4.8% to 13.48 million tonnes in 2013. An anticipated 5.2% fall in Chinese production in 2012 will be the first reduction for 23 years, however in 2013 a rise in output of 9.1% is expected in China.

The latest forecasts supplied by the ILSZ Group's member countries indicate that global supply of refined zinc metal will exceed demand by 153,000 tonnes in 2012 and by 293,000 tonnes in 2013.

Government of India 12^th Five-Year Plan

As per Government of India report of working group on mineral exploration and development for 12^th five year plan, the Zinc demand in India is expected to remain strong in the coming years on account of growth in the key zinc consuming industries like infrastructure, realty and manufacturing. Moreover due to the growth in automobile and consumer durables industry would also further aid the increase in consumption of zinc

Demand for zinc in India is expecting from 6,00,000 lakh tones in 2012-13 to 8,80,000 tonne in 2016-17.Considering continuous supply of 20,000 tonne from secondary route and 50,000 tonne from imports in every year about 9 lakh tones production are projected with marginal increase from 2012-13 to 2015-16. This production projections are given is in correlation with gradual reduction of exports with reference to domestic consumption. The current zinc production capacity of HZL is 917000 tones.