Zinc Market Holds Firm Amid Weak Chinese Demand, Supply Uncertainty

Key Takeaways

• LME Zinc Edges Up: LME zinc traded between $2,662–$2,700/mt, supported by geopolitical risks and disappointing US employment data.
• SHFE Zinc Declines: Domestic prices weakened due to higher inventory and lower downstream demand, pushing the SHFE/LME ratio to 8.4.
• MCX Zinc Softens: Indian zinc prices opened at Rs 255.7/kg and settled at Rs 253.5/kg amid global cues and cautious sentiment.
• China PMI Weakens Demand: China’s manufacturing PMI fell for the second month, dragging demand expectations and reinforcing stimulus hopes.
• Global Surplus Narrows: ILZSG data shows the zinc surplus fell to 23,700 mt in March, suggesting tightening supply conditions globally. 

Zinc Market Prices

• LME: As of today, LME zinc opened at $2,685/mt, reaching a high of $2,700/mt and low of $2,662/mt. Currently, LME Zinc trading commenced at $2,670/mt.
• SHFE: This week, the SHFE/LME price ratio pulled back to around 8.4, and the import window for zinc ingot closed. Overseas, the "steel tariff" imposed by the Trump administration once again escalated global trade tensions. Coupled with the intensification of the Russia-Ukraine conflict, geopolitical risks rose rapidly, and market risk-averse sentiment continued to strengthen, driving up LME zinc prices. 
• Subsequently, the US ADP employment data for May "disappointed," and LME zinc prices stabilized. Domestically, inventory increased, while downstream consumption gradually weakened. 
• In addition, due to the linkage effect between the SHFE and LME markets, SHFE zinc prices continued to decline. 
• In this situation where the overseas market outperforms the domestic market, the SHFE/LME price ratio showed a downward trend. It is expected that next week, the SHFE/LME price ratio may fluctuate.
• MCX: As of today, MCX Zinc prices opened at Rs 255.7/kg, reached the highest level of Rs 255.95/kg, the lowest level at Rs 252.95/kg and is currently trading at Rs 253.5/kg.

Zinc Supply & Demand

• LME Opening Stock - 137150 | Live Warrants - 75100 | Cancelled Warrants - 62050
• Zinc prices slipped by 0.23% to settle at 255.35 amid prevailing concerns over global trade tensions and weak demand signals from China. 
• Market sentiment remained under pressure as the trade outlook soured following U.S. President Donald Trump’s strong remarks against his Chinese counterpart Xi Jinping, casting doubt on the progress of upcoming trade negotiations. 
• These geopolitical tensions, coupled with broad weakness across base metals, weighed on zinc prices. 
• Demand-side concerns intensified as China’s manufacturing PMI contracted for the second consecutive month, reinforcing expectations of further stimulus measures from Beijing to support industrial activity.

Supply Side:

• On the supply side, however, the picture remained mixed. The Shanghai Futures Exchange continued to signal tight supply due to ongoing maintenance at smelters and historically low inventory levels, which helped cap the downside in prices. 
• According to the International Lead and Zinc Study Group (ILZSG), the global zinc market surplus narrowed sharply to 23,700 mt in March from 75,900 mt in February, indicating a tightening market. Over the first quarter of 2025, the global surplus totalled 143,000 mt, slightly down from 148,000 mt a year earlier.

Zinc Market News

• Zinc prices slipped 0.23% to Rs 255.35/kg as global trade tensions and weak Chinese demand weighed on sentiment. Despite tightening supply, bearish macro signals kept prices in check.
• In China, subdued spot market activity continued, with falling premiums in Guangdong and weak downstream buying in Tianjin. Transactions for zinc ingots ranged from 22,480 to 22,710 yuan/mt, with limited interest from brands like Zijin.
• Globally, zinc futures hovered near $2,700/mt in early June. Supply disruptions offered some support, but soft demand, especially from China, kept gains in check.

Expert Opinion

In experts’ opinion, the market witnessed long liquidation as open interest dropped by 7.55% to 2,938 lots. Zinc now finds support at 254.3, with further weakness likely leading to 253.1. Resistance is seen at 256.7, and a breakout could push prices toward 257.9.