Prices for base metal are up 70% this year
NEW DELHI—In a stellar year for commodities, one base metal—zinc—has stood out from the pack, with prices rising more than 70%. Thanks to greater demand for higher-quality cars in big developing markets like India and China, many investors believe this rally won’t be just a flash in the pan.
Zinc’s surge had already been aided by the closure of several mines world-wide during a previous price slump, which restricted supply of the base metal. Now, with consumers in India and China buying more cars that use rustproof galvanized steel—which is made using zinc—analysts believe demand could continue to outstrip supply.
“The rise in zinc and coal has certainly brought back investor optimism,” said Steve Hulton, research director at Metals & Mining Fundamentals in Sydney. “Given zinc’s comparatively tighter fundamentals among base metals, we do expect zinc prices to continue to outperform.”
At the moment, the bodies of cars sold in India and China use galvanized steel sparingly. While its use adds less than 2% to the price of a car, according to Sunil Duggal, chief executive officer of Hindustan Zinc Ltd., auto makers have been reluctant to make it standard in developing markets due to a lack of consumer awareness about its benefits, in addition to cutthroat price competition.
That could change as more affluent customers demand better-made rides. It takes nearly 8 kilograms of zinc to protect a car from rust and another 9 kilograms for die-cast parts like locks and door handles.
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