Zinc prices settled lower by 0.42% at Rs 371.75, influenced by concerns regarding a prolonged higher interest rate environment in the United States and the improving prospects for a diplomatic resolution between Washington and Tehran, which negatively impacted sentiment across the base metals complex. Stronger-than-expected U.S. economic data, particularly higher job openings and robust private sector hiring figures, bolstered the U.S. dollar and diminished expectations for imminent Federal Reserve rate cuts, thereby exerting additional pressure on metal prices. Despite the decline, the downside remained constrained due to the tightening of global supply conditions.
Nexa Resources has temporarily halted operations at its Cajamarquilla zinc smelter in Peru, the largest zinc smelter in Latin America, due to a fire that has caused damage to critical infrastructure. The disruption occurred shortly after an explosion at Glencore-owned Kazzinc’s zinc and lead facilities in Kazakhstan, which necessitated a reduction in operational capacity. These incidents have underscored apprehensions regarding the availability of refined zinc, especially given that the International Lead and Zinc Study Group had previously forecasted a refined zinc shortfall for the year. Inventory trends persist in offering fundamental support.
London Metal Exchange zinc stocks are currently at 111,250 tonnes, which accounts for less than three days of global consumption. However, the cash-to-three-month zinc spread remained in discount territory, indicating that immediate physical tightness has yet to emerge. Meanwhile, zinc inventories in Shanghai warehouses saw a modest increase, as China’s central bank reiterated its dedication to sustaining accommodative monetary policies aimed at bolstering domestic demand and fostering economic growth. On the supply side, certain bullish effects were mitigated by intentions to restart production at Sweden’s Garpenberg mine and heightened output objectives from Japanese producers.
The global zinc market surplus experienced a notable contraction in March, although the surpluses for the first quarter continued to exceed those of the previous year. Technically, the market is experiencing long liquidation, as evidenced by a 5.93% decrease in open interest, bringing it down to 2,743 contracts. Zinc exhibits immediate support at Rs 369.4, with a breach of this threshold likely to challenge Rs 366.9. Resistance is identified at Rs 374.0, and a breach of this threshold may lead to further advancements toward Rs 376.1.