Zinc settled sharply higher by 3.05% at Rs 424.7, bolstered by tightening supplies outside China, a decrease in LME inventories, and apprehensions regarding possible production disruptions in China. LME zinc stocks have decreased by 25% since mid-June, now totalling 93,250 tonnes. Concurrently, the premium of LME cash zinc over three-month zinc has risen to $132 per tonne from zero in early July, marking its highest level since December. Heavy rainfall and flooding in parts of China pose a significant risk to mining and smelting operations. Production adjustments at a mine in Southwest China are anticipated to decrease August concentrate output by approximately 1,000 tonnes.

Meanwhile, maintenance activities at a smelter in Central China may lead to a reduction in refined production by 1,000 to 1,500 tonnes. Global supply has also weakened, as evidenced by Glencore’s report of first-half own-sourced zinc production declining 21% year-on-year to 365,600 tonnes. Similarly, Boliden’s zinc concentrate output decreased by 16.8% quarter-on-quarter, reaching 74,200 tonnes. Nexa reported second-quarter zinc production of 79.3 kt, reflecting an 8% increase year-on-year. In contrast, Minmetals Resources produced 105,800 tonnes and upheld its full-year guidance of 215,000-235,000 tonnes.

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, in contrast to 44,000 tonnes during the same timeframe the previous year. China’s refined zinc output increased by 10% year-on-year to 641,000 tonnes in May, reflecting robust smelter operations and constraining potential price increases. Elevated prices have begun to dampen demand, especially among Chinese purchasers.

Technically, zinc is experiencing short covering, as evidenced by a 23.67% decline in open interest to 1,409, while prices have increased by Rs 12.55. Immediate support is positioned at Rs 414.5, succeeded by Rs 404.2, whereas resistance levels are identified at Rs 430.8 and Rs 436.8. A sustained move above Rs 430.8 could extend the rally toward Rs 436.8, while a break below Rs 414.5 may trigger profit-taking toward Rs 404.2.