Zinc prices settled 0.69% higher at Rs 394.85, buoyed by a more favourable market sentiment stemming from the alleviation of geopolitical tensions between the United States and Iran, alongside persistent worries regarding tight near-term supply. Risk appetite strengthened following renewed diplomatic efforts that alleviated concerns regarding the potential for further conflict in the Middle East. Supply-side support was further bolstered by a reduction in available inventories on the London Metal Exchange, with stocks decreasing to 73,825 tonnes, marking the lowest level since December.

The LME cash contract maintained a notable premium over the three-month contract, illustrating ongoing backwardation and signalling constrained immediate supply. In China, significant rainfall and flooding have heightened apprehensions regarding potential interruptions to mining operations, smelting activities, and transportation, thereby providing additional support to prices. Fundamental developments underscored a mixed supply outlook. A mine in southwest China is anticipated to decrease zinc concentrate production by approximately 1,000 tonnes in August, while a significant smelter in central China is scheduled for routine maintenance that may lead to a reduction in refined output by 1,000 to 1,500 tonnes.

Glencore disclosed a 21% year-on-year decrease in its first-half own-sourced zinc production, yet it upheld its full-year production guidance. Boliden and MMG reported a decline in zinc output, whereas Japan’s Mitsui Mining and Smelting intends to boost refined zinc production by 3.2% in the first half of the 2026/27 financial year. Meanwhile, China’s refined zinc production increased by 10% year-on-year in May, indicative of robust smelter operations. The International Lead and Zinc Study Group reported that the global refined zinc surplus narrowed to 8,700 tonnes in May from 43,400 tonnes in April, suggesting improving market balance.

Technically, zinc experienced short covering as open interest decreased by 1.34%, signifying the unwinding of bearish positions. Immediate support is positioned at Rs 391.4, with subsequent support at Rs 388.0, while resistance is identified at Rs 397.6. A sustained move above this level could strengthen bullish momentum and open the way for a test of the Rs 400.4 level.