Zinc settled 1.86% lower at Rs. 409.45 as expectations of recovering Chinese mine production and improved concentrate availability raised prospects of easing supply tightness. However, the downside remained constrained by apprehensions regarding mine supply disruptions and shortages in Western markets. Near-term tightness was evident in the LME cash zinc premium over the three-month contract, which surged to $106 per tonne from $45 last week. Meanwhile, available LME inventories experienced a week-on-week decline of 14%, while stocks on the Shanghai Futures Exchange decreased by 5% to 137,139 tonnes, marking their lowest level since March. LME inventories were recorded at 133,700 tonnes.
Supply constraints in Western markets persisted, as refined zinc production experienced a year-on-year decline of 3.4% in the first half of 2026, attributed to high energy costs and restricted availability of raw materials. In September, China’s refined zinc production experienced a decline of 1.9% compared to the previous month and a notable decrease of 6.4% year-on-year. However, the resumption of Chinese mines following operational disruptions and safety inspections is anticipated to enhance concentrate availability in October, potentially constraining further price increases.
Concerns regarding Nyrstar’s unprofitable Budel smelter in the Netherlands have introduced ambiguity into the Western supply forecast, even as Japan’s Mitsui Kinzoku intends to boost refined zinc production by 32% in the latter half of its fiscal year. In August, the global refined zinc market experienced a deficit of 3,900 tonnes, a notable shift from the surplus of 27,500 tonnes observed in July, as reported by the International Lead and Zinc Study Group. However, the market is anticipated to transition from a deficit of 88,000 tonnes in 2026 to a surplus of 25,000 tonnes in 2027, bolstered by a 2% rise in refined production to 14.21 million tonnes.
Global zinc demand is projected to increase by 1.2% to 14.19 million tonnes by 2027, propelled by heightened consumption in Europe, India, and the United States. However, a deceleration in Chinese real estate investment may constrain the growth of demand. Technically, the market is experiencing new selling pressure, evidenced by a 13.02% rise in open interest to 2,187 contracts, alongside a price decrease of Rs. 7.75. Zinc is presently encountering support at Rs. 404.50, with an additional support level at Rs. 399.50, while resistance is established at Rs. 417. A sustained move above this level could push prices toward Rs. 424.50.
