Zinc Prices Struggle Amid Macro Uncertainty and Weakened Demand

Key Highlights:

• LME Zinc continues four-day losing streak, trading around $2702/mt. 
• SHFE Zinc closes higher amid weak supply-side support. 
• Global zinc supply tightens as major mines reduce output. 
• China's Q2 GDP beats expectations, but zinc demand remains soft.

Global Price Overview: LME, SHFE, and MCX

• LME: As of Today, LME zinc opened at $2698/mt, reaching a high of $2715/mt and low of $2684/mt, and Currently, LME Zinc trading commenced at $2702/mt.
• SHFE: SHFE zinc to continuously decline below the daily average line. Subsequently, bears reduced their positions, and SHFE zinc rose, touching a high of 22,120 yuan/mt. 
• It ultimately closed higher at 22,100 yuan/mt, up 55 yuan/mt or 0.25%. Trading volume decreased to 37,483 lots, while open interest decreased by 5,592 lots to 72,719 lots.
• Overnight, LME zinc recorded a four-day losing streak, with the 5/20-day moving averages above exerting pressure and the lower Bollinger Bands providing support. Market sentiment fluctuated significantly due to rumors that Trump would fire Powell. 
• The US dollar index plunged during the session, while the US PPI in June hit a new low since September 2024, causing the center of LME zinc to continue to decline. Overnight, SHFE zinc recorded a bullish candlestick, with the 5/20-day moving averages above exerting pressure and the lower Bollinger Bands providing support. 
• The current expectation of a loose supply side in China continues, weakening the support for SHFE zinc. Meanwhile, downstream consumption is weakening. However, with significant macro uncertainties, SHFE zinc is expected to remain in the doldrums in the short term.
• MCX: As of Today, MCX Zinc prices opened at ₹257.0/kg, reached the highest level of ₹257.3/kg, lowest level at ₹255.2/kg and Currently Traded at ₹256.3/kg.

Zinc Market Outlook: China’s Economic Resilience vs Global Supply Challenges

LME Inventory Update:

• Opening Stock: 121,350 tons
• Live Warrants: 97,375 tons
• Cancelled Warrants: 23,975 tons

Demand Outlook: Mixed Signals from China’s Economy

Zinc prices settled marginally higher by 0.02% at ₹256.45, supported by encouraging signs from China’s economic data. The country’s Q2 GDP expanded by 5.2% year-on-year, slightly outperforming expectations of 5.1% but slowing from Q1’s 5.4%. While early factory shipments ahead of trade tariffs provided short-term momentum, concerns persist over weaker exports, falling prices, and sluggish consumer sentiment, all of which could curb zinc demand in the latter half of the year.

Supply Update: Output Drops Amid Mine Depletion and Smelter Cuts

On the supply side, tightening fundamentals are emerging:

• Teck Resources’ Red Dog Mine, the world’s largest zinc mine, reported a 20% YoY drop in Q1 output, reaching just 145,300 tons as reserves near depletion.
• In Australia, Nyrstar (EBR: NYR) announced plans to cut zinc output by 25% this year due to ore shortages and lower treatment charges.
• According to ILZSG, the global zinc surplus narrowed to 16,000 tons in April, down from 23,400 tons in March.

In China, refined zinc production declined by 1% month-on-month in May, although it rose 2% year-on-year. Still, total production for January–May edged up just 0.5% YoY, falling short of expectations due to maintenance-related shutdowns across major regions.

Expert Opinion: Short-Term Price Support and Resistance Levels

Zinc witnessed renewed buying interest as open interest rose by 4.02% to 2,663, while prices edged up by 0.05%. Immediate support is seen at ₹255.1; a break below this level could lead to further downside towards ₹253.6. On the upside, resistance is expected at ₹257.5, with a sustained breakout potentially pushing prices towards ₹258.4.