Padaeng Industry believes there is a bright outlook for its business operations this year, in line with the rising demand for zinc in the world market as the global economy recovers, especially in Europe and China.
Managing director Francis Vanbellen said the zinc price this year was expected to average US$2,500 per tonne, up from $1,910. As of Thursday, the price was $2,118 per tonne.
He added that the company would cut production costs by lowering capacity by 25 per cent to 75,000 tonnes per year from 110,000 to match sales. This will enable it to trim the costs of electricity costs and raw-material imports. Moreover, it will increase the use of low-cost recycled zinc as a raw material.
The company has also hedged on the price of raw zinc, its main raw material. The hedging covers 13,800 tonnes of zinc at its Tak production base, or 35 per cent of the total estimated production there this year. The hedging is based on an exchange rate of Bt33.05 per US dollar. This will help the company deal with risk from foreign-exchange volatility.
Currently Padaeng Industry commands half of the Thai zinc market, which has total sales of 150,000 tonnes per year. Of the company’s total production, 90 per cent is sold in the local market. Padaeng has conducted feasibility studies on investing in new projects to boost revenue and profit. It is also interested in jumping into the green-energy business, including solar, wind and biomass. It has also conducted a feasibility study on the business of recycling industrial waste.
Padaeng, which operates a zinc smelter, posted a consolidated loss of Bt413.40 million for the fourth quarter of last year and a consolidated loss of Bt530.06 million for all of 2013. A provision of Bt926.28 million from impairment of exploration assets of its subsidiary Puthep copper project was included in those results.