OPERATING ENVIRONMENT

Forging Ahead on the Opportunity Landscape

The growth strategy at Hindustan Zinc is guided by the developments and changes taking place in the external environment. We closely monitor these changes and align our strategic response to the same. We harness our understanding of the business to identify the emerging opportunities, and accordingly develop impactful strategies and plans. The global and domestic economic scenario, as well as the demand-supply situation were some of the key areas that defined our strategic approach during FY 2023-24. Other elements of our response strategy included the various ESG issues of our stakeholders, and the growing digital/cybersecurity focus.

GLOBAL AND INDIAN ECONOMIC CONDITIONS

Global economic conditions can substantially influence the demand and supply of commodities in various industries.

The global economy was significantly hit by the recent pandemic. Russia-Ukraine war and the resultant cost-ofliving issue were other factors that impacted the world economic situation. The Red Sea crisis which erupted in late 2023 further derailed the global supply chain and affected the world economy adversely. Approximately, 30% of global containers shipping to Asia traverse Red Sea, accounting for 15% of the Suez Canal traffic. This includes shipments carrying oil and gas, common goods, and commodities vital to the world economy.

However, despite the effects of Russia-Ukraine war on the food and oil market, and the tightening global monetary policy, the world economy started witnessing a steady recovery in 2023. This was on account of the bottoming out of the global economy, and the progressive decline in inflation - both headline and underlying (core).

The recovery, however, has been unequal and sluggish, and marked by widening global disparities. The World Economic Outlook (WEO) has projected global economic growth for 2024 and 2025 at below the historical (2000-19) average of 3.8%. The projection is guided by the high central bank policy rates, withdrawal of fiscal support due to excessive debt-burdening economic activity, and low underlying productivity growth.

In India, strong economic development is being driven by domestic demand, bolstered by the government's capital expenditure and focus on ‘Make in India’. Expectations for income and expenditure are improving as consumer sentiment is rising. The construction, raw materials, and machinery sectors stand to gain the most from the capex boom, with an emphasis on enhancing infrastructure in transportation and power networks. This is set to augment corporate competitiveness and productivity, and improve future possibilities for economic growth. With a stronger-than-expected consumption between April-June 2024, growth in India is predicted to remain robust at 7% in both 2024 and 2025, as per the Reserve Bank of India.

DEMAND AND SUPPLY FOR THE COMMODITIES

Hindustan Zinc deals in multiple commodities including zinc, lead and silver. We witnessed a mixed performance for these commodities during the year. Globally, the demand for zinc declined and that of lead grew marginally. Coupled with unsustainable metal surpluses and macroeconomic headwinds, this led to a decline in their LME prices. Silver LMBA prices ended higher, but demand for the year was lower in 2023 versus the record-breaking demand in 2022. In India, while zinc demand was steady, the demand for lead and silver was slightly subdued.

Refer to page 329 for details on commodity demand and prices

ENHANCED STAKEHOLDER FOCUS ON ESG

There is, globally, an increased stakeholder interest in Environmental, Social & Governance (ESG) issues. Major stakeholders like the government, customers, investors and the community are pitching for integrating ESG aspects into business models, strategies and capital allocation decisions to drive sustainable and long-term value creation. The metal and mining sector is also witnessing enhanced stakeholder interest, with a growing demand for bigger investments in sustainability-linked initiatives. There is, within the sector, a strong focus on enhancing ESG disclosures in line with ESG regulations and reporting standards, as well as India’s net zero target by 2070.

DIGITAL EXCELLENCE AND CYBERSECURITY

The metal and mining industry is undergoing major digital transformation, with increasing use of digital technologies. Agile adoption of digital technologies helps to improve and modernise the methods of extraction, processing and transportation of metals and minerals. Use of AI (Artificial Intelligence), data analytics, Industrial Internet of Things (IIoT) and other advanced technologies is enabling the industry to boost its operational efficiencies and productivity.

Digital tools and methodologies are aiding companies operating in this industry to optimise their operations and costs. This is further helping to eliminate production inefficiencies, manage resources effectively, and enable prudent decision-making. While bringing a new level of agility and dynamism into the operations, this has also enhanced the need for a robust cybersecurity framework. In the absence of strong cybersecurity measures, organisations can get exposed to data breaches, disrupting operations and compromising sensitive information. Embracing digital excellence becomes vital to staying competitive and resilient in the modern mining industry.