Zinc prices experienced a modest decline, closing down by 0.39% at Rs 348.1, influenced by uncertainty surrounding the Iran ceasefire and prevailing geopolitical tensions that affected market sentiment. Despite the decline, the underlying fundamentals continue to provide a degree of support, mitigating the risk of a significant downturn. Tightening conditions on the supply front continue to provide a cushion. LME inventories have decreased to 107,525 tonnes, reaching a one-month low, while stocks at the Shanghai Futures Exchange have predominantly shown a downward trend, indicating a contraction in physical availability.
Decreasing treatment charges for zinc concentrate, coupled with persistent mine disruptions, have further limited near-term supply, rendering the market particularly susceptible to any additional shocks. Simultaneously, indicators of demand are reflecting a trend of enhancement. China’s factory activity has returned to expansion territory, enhancing expectations for base metal consumption. Furthermore, data on producer prices indicated that factory-gate inflation has increased for the first time in more than three years, implying heightened cost pressures in the industrial sector.
Nonetheless, the potential for gains is being constrained by apprehensions regarding the wider economic ramifications of the Middle East conflict and its possible hindrance to global growth. From a supply outlook perspective, the restart of Boliden’s Tara mine and the ramp-up at Ivanhoe Mines’ Kipushi project are anticipated to maintain a modest surplus in the global zinc market. Data from the International Lead and Zinc Study Group indicated a surplus of 9,200 tonnes in January, albeit narrower than prior levels. Goldman Sachs projects a modest surplus for 2026, anticipating demand growth of approximately 2% per year.
From a technical perspective, the market is experiencing long liquidation, evidenced by a 14.93% decline in open interest in conjunction with softer prices. Immediate support is identified at Rs 345.9, with a breach below possibly examining Rs 343.7. On the upside, resistance is positioned at Rs 350, and a breach of this level may lead to further gains toward Rs 351.9.