Zinc prices experienced a decline of 2.39%, settling at Rs 353.7. This decrease was influenced by a stronger U.S. dollar, as investors raised their expectations for additional rate hikes by the Federal Reserve. The dollar ascended to a 13-month peak, diminishing the attractiveness of industrial metals and exerting pressure on the overall sentiment surrounding commodities. Additional pressure emerged from the increase in Chinese zinc production, which rose by 9.4% year-on-year in May. This uptick indicates enhanced domestic supply conditions and a reduction in immediate availability concerns. Despite the price decline, the underlying fundamentals continue to exhibit a relatively supportive stance.

Advancements in diplomatic negotiations among leading economies have bolstered expectations for global industrial activity, thereby enhancing the demand outlook for base metals. Supply-side concerns also persist in establishing a baseline for prices. Glencore’s Kazzinc facility in Kazakhstan is currently functioning at diminished capacity due to an explosion, whereas Nexa’s Cajamarquilla smelter in Peru has undergone a temporary shutdown as a result of fire damage, with production resuming only gradually. Concerns have arisen about the sustained reduction in output at Boliden’s Garpenberg mine following a seismic event that occurred earlier this year.

Market balances continue to exhibit a degree of tightness, even in light of the recent uptick in production levels. The International Lead and Zinc Study Group reported that the global zinc market surplus narrowed significantly to 26,500 tonnes in April from 56,300 tonnes in March. Earlier forecasts had indicated a refined zinc deficit for this year, whereas Goldman Sachs anticipates a modest surplus, bolstered by increasing mine supply and the destocking of concentrates. Looking ahead, a deceleration in mine supply growth during 2027 and 2028 may result in deficit conditions in markets outside of China.

Meanwhile, zinc inventories in Shanghai Futures Exchange warehouses decreased by 1.2% last week, suggesting stable consumption patterns. Technically, the market is experiencing long liquidation, evidenced by a significant decline in open interest, which dropped by 34.14% to 847 lots, coinciding with a decrease in prices. Zinc has immediate support at Rs 349.7; a break below this level is likely to extend losses towards Rs 345.5. Resistance is observed at Rs 360.6, and a breach of this threshold may catalyse additional upward movement towards Rs 367.3.