Zinc prices decreased by 0.79% to close at Rs 276.25, coinciding with China’s refined zinc production in August reaching its highest monthly level since the first quarter of 2024. Nonetheless, the downside was constrained due to tightening supply conditions and anticipations of capacity reductions in China, as authorities escalate efforts to mitigate overcapacity in heavy industries to address deflationary pressures.

China’s macroeconomic indicators exhibited notable weakness, as August industrial production declined to a one-year low and retail sales fell to an eight-month low, both figures falling short of expectations. In terms of inventory dynamics, zinc stocks within Shanghai Futures Exchange warehouses experienced an increase of 4.9% compared to last Friday.

Conversely, LME-registered zinc inventories saw a significant reduction, now standing at 48,825 tons, which marks a decline of nearly 75% since mid-April. Cancelled warrants indicated an additional 15,375 tons designated for delivery, reflecting a constriction in availability. In June, the global zinc market experienced a deficit of 27,200 tons, a decrease from the 31,400 tons recorded in May. However, data indicated a refined zinc surplus of 47,000 tons for the first half of 2025. Furthermore, disruptions caused by weather in southern China, along with scheduled maintenance at smelters in various provinces, have limited near-term production capabilities. Although July output experienced an increase compared to both the previous year and the preceding month, a further moderation is anticipated in September.

From a technical perspective, the market is experiencing long liquidation, evidenced by a decline in open interest of 11% to 2,330, alongside a price decrease of Rs 2.2. Support is positioned at Rs 274.4, with additional downside potential at Rs 272.6. Resistance is identified at Rs 278.9, and a breach above this level may drive prices toward Rs 281.6.