Zinc experienced a decline of -0.87% yesterday, closing at Rs 291.9, amid escalating U.S.-China trade tensions following China’s decision to broaden rare earth export controls and President Trump’s warning of significant new tariffs. The downside, however, was constrained by supply issues stemming from the shutdown of Japan’s significant Toho Zinc Annaka facility and lowered output projections from Mitsui Mining and Smelting, which anticipates a 6.6% year-on-year decline in refined zinc production in the second half of FY2025-26.

LME zinc inventories have decreased by 80% this year, reaching 48,825 tons, the lowest level since May. Concurrently, the premium of cash zinc over the three-month contract has risen to $51 per ton, signaling a constrained near-term supply situation. The International Lead and Zinc Study Group reported that mined zinc production increased by 6.3% in the first half of 2025; however, refined output experienced a decline of over 2% attributed to refinery bottlenecks in Kazakhstan and China. Simultaneously, Chinese smelters are encountering increasing pressure to reduce output due to an excess in capacity and interruptions caused by weather conditions.

On the global front, the zinc market transitioned to a surplus of 30,200 tons in July; however, the year-to-date surplus continues to trail behind last year’s figures, indicating a gradual tightening trend. Increasing treatment charges to $87.5 per ton indicate mounting pressure on smelters. Notwithstanding increased output from Peru’s Antamina mine, apprehensions regarding supply remain as stockpiles continue to diminish.

From a technical perspective, the market is experiencing long liquidation, as evidenced by a 1.13% decrease in open interest to 3,250, alongside a price decline of Rs 2.55. Zinc currently has support levels at Rs 289.3 and Rs 286.7, while resistance is identified at Rs 296.3, with a potential upward movement that could challenge the Rs 300.7 mark