Hindustan Zinc is set to capitalize on its cost advantage to dominate the Middle Eastern zinc market as it prepares to expand production capacity from over 1 million tonnes to 2 million tonnes, according to CEO Arun Misra.
“We are the lowest-cost producer globally. If we double our current output, we’ll be producing far more than India’s domestic demand,” Misra said in an exclusive interview. “Several high-cost global smelters will likely shut down as a result,” he added.
As India’s largest zinc producer and the second-largest globally, Hindustan Zinc achieved its highest-ever annual production in 2023-24, with 817,000 tonnes of zinc and 216,000 tonnes of lead produced. Misra noted that the company’s cost advantage will grow further as production scales up and renewable power usage increases.
Currently producing zinc at about $1,100 per tonne, the company expects costs to drop to $1,050 per tonne in the coming year. “By increasing production to 1.6 or 1.7 million tonnes, we could push costs even lower, closer to $1,000 per tonne,” he explained.
India consumes around 850,000 tonnes of zinc annually, including alloys. With plans to increase production to 2 million tonnes, Hindustan Zinc will have 1.6 million tonnes of zinc available for the domestic market, leaving a significant surplus for exports. The company controls 75% of the Indian zinc market.
Approximately 800,000 tonnes of surplus zinc will be earmarked for export, with the Middle East market being a top priority. After capturing the Middle East, Hindustan Zinc plans to target Eastern Europe, Turkey, and eventually the rest of Europe.
Although the company’s expansion is supported by strong cash flows, Misra mentioned that borrowing could also be an option due to low borrowing costs. “Our weighted average cost of borrowing is lower than the returns we earn from treasury investments,” he said.
Meanwhile, the Indian government is looking to sell its 29.5% stake in Hindustan Zinc, with recent non-deal roadshows held in the UK, US, Singapore, and Hong Kong to gather feedback from institutional investors. Misra, who participated in these roadshows, highlighted that the company’s strong dividend payout has been well-received by investors.
While Vedanta holds a 63% stake in Hindustan Zinc, the government’s potential stake sale is anticipated to increase the stock’s free float, making it more accessible to institutional investors looking to acquire significant holdings.
