Zinc settled higher by 0.91% at Rs. 415, supported by a weaker US dollar, with the dollar index declining to 101.3, its lowest level in five weeks, amid changing political expectations following the Democratic sweep in the US midterm elections. Additional support stemmed from apprehensions regarding the constriction of mine supply, diminishing treatment charges, and a decrease in refined metal production. China’s zinc ore imports have experienced a downturn since April, leading to a tightening of concentrate availability and resulting in treatment charges reaching unprecedented lows. Concurrently, northern mines are anticipated to reduce production in November as smelters finalise their winter stockpiling efforts.
The LME cash zinc premium over the three-month contract has experienced a significant increase, rising to $106 per tonne from $45 last week, underscoring a notable immediate supply tightness. In September, China’s refined zinc production experienced a month-on-month decline of 1.9% and a year-on-year decrease of 6.4%. Concurrently, inventories monitored by the Shanghai Futures Exchange saw a reduction of 1.6%. The global refined zinc market transitioned to a deficit of 3,900 metric tonnes in August, reversing the surplus of 27,500 tonnes recorded in July, as reported by the International Lead and Zinc Study Group.
However, expectations of recovering Chinese mine production and improved concentrate availability may constrain additional advancements. China’s manufacturing PMI held steady in expansion territory at 52.0 in October, indicating the eleventh consecutive month above the 50-point threshold. Looking ahead, the ILZSG anticipates a shift in the global refined zinc market from a deficit of 88,000 tonnes in 2026 to a surplus of 25,000 tonnes in 2027. This change is attributed to a 2% increase in refined production, reaching 14.21 million tonnes, alongside a 3% rise in mine production, totalling 12.78 million tonnes. Global zinc demand is projected to increase by 1.2% to reach 14.19 million tonnes by 2027.
However, the slower growth in Chinese consumption, particularly due to challenges in the property sector, continues to raise concerns. Technically, the market is experiencing short covering, evidenced by a 5.74% decline in open interest to 1,577 contracts, alongside a price increase of Rs. 3.75. This suggests that the recovery was largely fuelled by the covering of existing short positions. Zinc is experiencing support at Rs. 410; a decline below this level could see prices testing Rs. 404.50. Conversely, resistance is established at Rs. 419. A sustained move above this level could push prices toward Rs. 422.50.
