Zinc prices declined 0.78% to settle at Rs 376.75, influenced by a stronger U.S. dollar and rising expectations of a Federal Reserve interest rate hike, which may dampen demand for industrial metals. Investor sentiment exhibited a degree of caution in anticipation of the Fed’s policy decision, although losses were somewhat mitigated by the tightening of near-term supply conditions. Scheduled maintenance at a zinc smelter in Central China in August is anticipated to decrease output by 1,000-1,500 tonnes, thereby offering some support to prices through the limitation of short-term supply.

Fundamental indicators exhibited a mixed performance. In May, China’s zinc production saw a year-on-year increase of 9.4%, reaching 64,000 tonnes, which underscores robust domestic output. Concurrently, zinc inventories tracked by the Shanghai Futures Exchange experienced a 0.8% decrease from the prior week, suggesting a steady physical demand. Supply concerns also persisted following operational disruptions at major smelters. Glencore’s Kazzinc facility in Kazakhstan maintained operations at a diminished capacity subsequent to an explosion, whereas Nexa’s Cajamarquilla smelter in Peru incrementally restarted production after interruptions caused by a fire.

Meanwhile, Japan’s Mitsui Mining and Smelting intends to boost refined zinc production by 3.2% in the first half of fiscal year 2026/27. The International Lead and Zinc Study Group reported that the global zinc market surplus narrowed sharply to 8,700 tonnes in May from 43,400 tonnes in April, highlighting improving market balance. Goldman Sachs anticipates a modest global surplus this year, yet foresees a deceleration in mine supply growth beyond 2026. This trend could lead to tighter market conditions in the medium term, as demand is expected to grow by approximately 2% each year.

From a technical perspective, zinc is experiencing renewed selling pressure, as evidenced by a 16.1% increase in open interest, which suggests the establishment of new short positions. Immediate support is established at Rs 375.5, with subsequent support at Rs 374.1. Resistance levels are identified at Rs 378.5 and Rs 380.1. A sustained move below support could extend the correction, whereas a breakout above resistance may trigger renewed buying interest.