Zinc settled 0.31% higher at Rs 400.85, bolstered by tightening supply, production disruptions, and declining LME inventories. However, elevated prices continued to restrain demand in the leading consumer, China. Heavy rainfall and flooding in various regions of China pose a risk to mining and smelting activities. Production modifications at a mine in Southwest China are anticipated to decrease August concentrate output by approximately 1,000 tonnes, whereas maintenance work at a smelter in Central China may lead to a reduction in refined output by 1,000 to 1,500 tonnes.

Global supply concerns have intensified following Glencore’s announcement of first-half zinc production at 365,600 tonnes, reflecting a 21% decrease compared to the previous year. Additionally, Boliden’s concentrate production experienced a quarter-on-quarter decline of 16.8%, totalling 74,200 tonnes. MMG produced 106,000 tonnes in the first half, which accounts for 48% of its annual guidance. LME zinc inventories have decreased to 95,000 tonnes, marking the lowest level since December. Concurrently, elevated cancelled warrants and diminishing on-warrant stocks have heightened the risk of a supply squeeze. The cash LME contract remained approximately $60 per tonne above the three-month forward, suggesting ongoing backwardation and short-term tightness.

However, warehouse inventories at the Shanghai Futures Exchange saw an increase of 2.1%, while China’s refined zinc output experienced a year-on-year rise of 10%, reaching 641,000 tonnes in May, which suggests robust smelter operations. The global refined zinc surplus contracted significantly to 8,700 tonnes in May, down from 43,400 tonnes in April. However, the surplus for the January-May period reached 163,000 tonnes, compared to 44,000 tonnes during the same timeframe the previous year.

China’s central bank has upheld a suitably accommodative monetary policy approach to bolster economic growth and ensure financial stability. Technically, zinc is experiencing short covering, evidenced by a 7.98% decline in open interest to 2,756 contracts, alongside a price increase of Rs 1.25. Support is positioned at Rs 399.20, and a breach beneath this threshold may reveal Rs 397.60. On the upside, resistance is observed at Rs 402.70, and a sustained move above this level could propel prices toward Rs 404.60.