Zinc Prices Drop Sharply as Inventories Rise, Market Remains Under Pressure

Key Insights

• Price Trends: LME zinc fell 2.57%, SHFE dropped 1.29%, and MCX declined 0.66%, pressured by rising inventories and weak demand.
• Inventory Impact: LME stocks rose by 7,400 mt (4.82%), while SHFE warehouse inventories surged by 26.3%, leading to bearish price movements.
• Global Market: China’s refined zinc output fell 7%, and Red Dog Mine’s expected slowdown in 2025 signals potential supply issues.
• Economic Factors: The dollar strengthened on trade tensions, while record-high bank loans in China failed to lift market sentiment.
• Market Outlook: Zinc is testing support at Rs 265.8, with a potential rebound towards Rs 270.5 if market sentiment improves.

Zinc Prices

• LME: As of yesterday, LME zinc opened at $2,915/mt, reaching a high of $2,926.5/mt and low of $2,845/mt, and it eventually closed down at $2,845/mt, a decrease of $75/mt or 2.57%. Today, LME Zinc trading commenced at $2,845.8/mt.
• SHFE: As of yesterday, the most-traded SHFE zinc 2504 contract opened at 23,850 yuan/mt, hitting a high of 23,870 yuan/mt, and eventually closing down at 23,680 yuan/mt, a decrease of 310 yuan/mt or 1.29%. Today, SHFE Zinc trading commenced at 23,645 yuan/mt.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 273.85/kg, reached the highest level of Rs 274.50, lowest level at Rs 269.60/kg and finally closed down at Rs 271.85/kg, a decrease of 1.85 or 0.66%. Today, MCX Zinc trading commenced at Rs 269.3/kg.

Zinc Supply & Demand

• LME Opening Stock - 161000 | Live Warrants - 142575 | Cancelled Warrants - 18425
• LME zinc saw a bearish trend as trading volume rose to 110,000 lots, but inventories increased by 7,400 mt (4.82%) to 161,000 mt, putting pressure on prices. The uncertain global situation and rising overseas inventories contributed to the downward movement.
• SHFE zinc also recorded a bearish candlestick, with trading volume decreasing to 73,485 lots. Domestic inventories rose, and demand has yet to fully recover, leading to short-term price fluctuations.
• MCX zinc prices fell 1.58% to Rs 267.55 due to rising inventories and global demand concerns. Despite record-high new bank loans in China, market sentiment remained cautious due to U.S. tariff threats. However, potential trade negotiations introduced optimism.
• On the supply side, global mined zinc production declined for the third consecutive year, with China’s refined zinc output down 7%. The Red Dog Mine in Alaska, responsible for 10% of global output, is expected to slow in 2025. ILZSG reported a 62,000-mt zinc deficit in 2024, reversing the 310,000-mt surplus in 2023. Chinese zinc concentrate imports fell 13.1%, while refined zinc imports rose 15.5%.

Zinc News

• Domestic inventory increase, SHFE Zinc opens lower with a gap.
• MCX Zinc falls as SHFE warehouse inventories surge by 26.3% over last Friday levels.
• The dollar strengthened, after falling to its lowest point in more than two months at the start of the week, buoyed by safe-haven flows after Trump said tariffs on Mexico and Canada would proceed as planned.
• Unionized workers and technicians at Korea Zinc have expressed worries about potential job losses and the future of the world's largest zinc smelter, which they have helped build for decades, in the wake of the fight for management control over the firm.

Expert Opinion

In experts’ opinion, the market remains under long liquidation as open interest fell sharply by 25.36% to 1,024 contracts. Zinc is finding support at Rs 265.8, with a drop below this level potentially testing Rs 264.1. On the upside, resistance is expected at Rs 270.5, and a breakout could push prices toward Rs 273.5.