Zinc experienced an increase of 1.17% yesterday, closing at Rs 303.15, driven by a reduction in trade tensions between China and the U.S. and a more favorable outlook on global economic growth, which bolstered buying interest. Reports indicate that both countries have established the framework for a trade deal anticipated to be finalized later this week, enhancing market optimism. There are expectations that this agreement could lead to a pause in U.S. tariffs and China’s restrictions on rare earth exports.

In a noteworthy development, China’s industrial profits experienced their most rapid growth in almost two years during September, indicating a resurgence in industrial activity and a possible recovery in demand. Supply-side fundamentals contributed to the robustness of prices. Zinc inventories in LME-approved warehouses have decreased to 37,050 tonnes, marking the lowest level since March 2023 and reflecting a decline of more than 80% since mid-April. The recent tightness has driven the cash-to-three-month premium to approximately $250 per tonne, following a peak of $338.74.

The International Lead and Zinc Study Group reports a decline of over 2% in global refined zinc production this year, even as mined output has increased by 6.3%. This discrepancy is attributed to smelter restrictions in Kazakhstan and Japan. In the meantime, inventories at the Shanghai Futures Exchange decreased by 0.4% compared to the previous week, suggesting consistent demand from China.

From a technical perspective, the market is experiencing short covering, evidenced by a 30.72% decline in open interest to 1,141, while prices have increased by Rs 3.5. Zinc is currently experiencing support at Rs 301.1, with a potential decline below this threshold likely to challenge the Rs 299.1 mark. Resistance is identified at Rs 304.3, and a breakthrough could propel prices toward the Rs 305.5 range.