Zinc prices declined by 0.74% to close at Rs 307.35, influenced by a stronger dollar index, which reached its highest point since early December as investors reevaluated the Federal Reserve’s policy outlook in light of mixed U.S. economic data. U.S. labor indicators exhibited resilience, as initial jobless claims saw a modest increase while announced job cuts experienced a significant decline. This development alleviates concerns regarding a potential near-term slowdown and exerts downward pressure on sentiment surrounding base metals. Nonetheless, the decline in zinc prices was constrained by diminishing inventories and ongoing supply-side limitations.

In terms of fundamentals, zinc stocks on the Shanghai Futures Exchange experienced a decline of 4.3% since late December, highlighting a constricting physical market. Numerous Chinese mines are set to undergo routine maintenance shutdowns, particularly in central and southwest China, anticipated to diminish concentrate availability. Notably, one mine is projected to reduce output by approximately 700 tons of metal content.

In December, China’s factory activity exhibited an unexpected expansion, offering a degree of support, while speculative buying indicated apprehensions regarding tighter near-term supply. Nonetheless, the potential for growth remained constrained by persistent concerns regarding demand, especially as the situation with China’s property investment and sales continued to worsen. Simultaneously, China’s refined zinc production experienced a significant year-on-year increase in November, underscoring a sufficient smelting supply.

From a technical perspective, the market is experiencing long liquidation, evidenced by a 16.54% decrease in open interest concurrent with a price drop of Rs 2.3. Zinc exhibits support at Rs 304.4; should prices fall below this level, a test of Rs 301.4 may occur. Conversely, resistance is identified at Rs 310, with a further level at Rs 312.6 contingent upon a sustained upward movement.