Hindustan Zinc explores doubling capacity; launches low-carbon zinc

Mumbai: Hindustan Zinc Ltd. is exploring options to double its annual output capacity to 2 million tonnes, and expects a final report from mining and production consultants next month for presenting to its board of directors, a top company executive said on Wednesday.

The Vedanta group company also launched a new low-carbon line of zinc, betting on demand from steelmakers as emission norms get stricter globally.

“By August, we will have the final report and we will place it before the board. In all probability, we will go for an expansion to 2 million tonnes," Arun Misra, chief executive of Hindustan Zinc, told Mint. Currently, it has an annual metal producing capacity of just over 1 million tonnes.

The country’s largest producer of zinc does not plan to acquire new mines or land for expansion. It will be ramping up output from its existing mines for raw material and the additional smelting capacity will also be based in its current leasehold at Chanderiya in Rajasthan.

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Hindustan Zinc has engaged two Australian mine-planning and mine-contracting companies to prepare a plan on doubling the capacity of its mines, according to Misra. Separately, it has also engaged a consultant for doubling its zinc smelting capacity, he said.

Misra clarified that the plan is still in an early stage and no material progress has so far been made.

"With demand for zinc projected to grow at 3-4% CAGR, capacity expansion at this stage will help Hindustan Zinc to meet domestic as well as export demand. The expansion will be largely brownfield and hence will require less capex compared to capex spent for current capacity. Further, proactive initiatives benefit in the long run," said Kunal Kothari, research analyst at Centrum Broking.

On Wednesday, the company launched EcoZen, a new line of low-emission zinc that it said causes a fourth of the emissions during production compared to the global standards. The lower emissions will be on account of using round-the-clock renewable power sourced from fellow group firm Serentica Renewables. The company will have a separate production line for making EcoZen that will run on round-the-clock renewable energy.

Hindustan Zinc did not disclose the pricing for this new product.

Misra said that this product could account for 8-10% of HZL’s zinc production this year and could go as high as 30% by next year. The company is betting on growing demand for low-emission raw materials from steelmakers, as they prepare for lower emission standards in export markets.

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Europe’s Carbon Border Adjustment Mechanism (CBAM) requires steel exporters to declare the carbon footprint of their products. From 2026, high carbon emitters will have to pay an extra duty to sell steel in the European market.

“All the steelmakers, especially those who export to Europe, have an obligation to declare their emissions. They will be all under pressure to reduce (their supply chain emissions)," Misra said.

“This helps them to show that net CO2 emission is much lesser compared to what they would get with normal zinc,” he said.

Zinc is used to produce galvanized steel, which is used in the automotive industry.

The stock of Hindustan Zinc gained 1.66% to close at ₹632.65 on the BSE on Wednesday compared to a 0.35% fall in the benchmark Sensex. The company’s share prices have doubled since the beginning of the year. Recently, a rally in the prices of silver has aided the company’s stock.

Hindustan Zinc is also the country’s largest producer of silver and lead. It recovers silver as a by-product during lead production.

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