Zinc producer sees lower margin
Padaeng Industry estimated that its gross margin would be lower than last year's 26 per cent, due to high concentrate costs and lower sales.
However, it was optimistic its bargaining power would increase in terms of negotiation, supply provision and selling network as its parent company is the top global zinc producer. Woratip Rerkpiboon, senior manager for the company's treasury and investor relations, said the firm's margin for the entire year would not be affected if the zinc price rose enough to cover negative factors. The zinc price in the beginning of the second quarter has increased and there are good prospects for the rest of the year, she said, adding that inventory in the industry remains low, which would keep the price high. China's production and consumption have played a crucial role in the world's zinc price. The price would decline if China's production exceeded its demand, causing it to export internationally, while a decline in China's zinc exports would push up the global zinc price. The company estimated that its sales volume this year would be more than 90,000 tonnes, close to last year's volume. Despite its strategy to depend largely on the domestic market, it is ready to shift to the export market, particularly Asia, if domestic demand shrinks, said Waratip. But the company would not export its products if the local demand picks up. Domestic prices are relatively higher than export prices, she said. The political situation, economic factors, and the monsoon have influenced zinc demand. Local demand may be adversely affected by an earlier-than-expected rainy season along with sluggish construction. It decelerated in the first quarter due to the economic slow-down. "If the political situation remains unstable for the rest of the year, domestic demand will slow down, but not more than 10 per cent. But our total sales volume will not decrease as we can export more," Waratip said. The company has exported zinc since last year's fourth quarter after it experienced sluggish local sales. Export volume rose in the first quarter, which helped it cope with fall in local sales. In the first quarter, 3,300 tonnes were exported, accounting for 14.7 per cent of total sales of 25,600 tonnes. Exports accounted for only for 0.4 per cent in the fourth quarter or 100 tonnes. The company recorded a first-quarter net profit of Bt314million, down 31 per cent. Despite unchanged total sales, the zinc price increased only 6 per cent with high concentrate costs. Anoma Srisukkasem The Nation
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