Zinc prices increased by 0.05% to close at Rs 365.2, buoyed by constricting global supply conditions due to production disruptions at significant smelting operations. However, gains remained constrained as robust U.S. economic data elevated the dollar and solidified anticipations that the Federal Reserve may implement interest rate hikes by the end of the year. In May, U.S. nonfarm payrolls rose by 172,000, surpassing market expectations considerably. Additionally, private sector employment outperformed forecasts, dampening prospects for imminent monetary easing and presenting challenges for base metals.

On the supply side, market sentiment remained bolstered after Nexa Resources temporarily halted operations at its 344,400-ton-per-year Cajamarquilla zinc smelter in Peru due to a fire that compromised essential infrastructure. Additional supply concerns have arisen as Kazzinc, a subsidiary of Glencore, reported diminished operating rates at its zinc and lead facilities in Kazakhstan due to an explosion. These disruptions occur concurrently with the International Lead and Zinc Study Group’s existing forecast of a refined zinc market deficit amounting to 19,000 tonnes for the current year. LME zinc inventories stand at 111,250 tonnes, which corresponds to less than three days of global consumption, underscoring the constrained supply conditions.

However, the cash zinc contract continues to trade at a discount to the three-month contract, indicating that immediate physical shortages are not yet evident. Meanwhile, several factors constrained additional price increases. Inventories at the Shanghai Futures Exchange experienced a slight increase, while Boliden, the Swedish mining company, has verified that operations at its Garpenberg zinc mine are anticipated to restart in the second quarter. Japan’s Mitsui Mining and Smelting has announced an intention to boost refined zinc production by 3.2% in the first half of the 2026-27 fiscal year.

Additionally, the global zinc market surplus contracted to 32,700 tonnes in March, down from 58,700 tonnes in February, indicating a trend towards improved market equilibrium. Technically, the market is experiencing short covering, as evidenced by a 4.42% decline in open interest to 2,511 contracts, accompanied by a modest increase in prices. Zinc has immediate support at Rs 362.7, with further downside support at Rs 360.2. Resistance is identified at Rs 367.0, and a consistent advance beyond this threshold may lead to further increases toward Rs 368.8.