Zinc prices decline on weak Chinese demand and retail sales concerns

Zinc prices fell 1% to close at 366.2, as growing concerns about weakening demand in China weighed on sentiment across the metals market.

Recent economic data from China showed retail sales declined 0.6% in May, marking their first contraction in more than three years, while fixed-asset investment dropped 4.1% during the first five months of the year, significantly worse than market expectations.

The figures raised concerns about the strength of industrial activity and construction demand in China, the world's largest consumer of metals.

However, Chinese industrial production rose 4.5% year-over-year in May, beating forecasts and providing some support to the broader metals complex.

Supply disruptions limit zinc losses

Despite mounting demand concerns, zinc's decline remained limited due to tightening global supply conditions.

Nexa Resources announced a temporary suspension of operations at its Cajamarquilla smelter in Peru after a fire damaged processing infrastructure.

Meanwhile, Kazzinc, owned by Glencore Group, continued operating at reduced capacity following an explosion that affected its zinc and lead production facilities in Kazakhstan.

These developments came as the International Lead and Zinc Study Group had already projected a refined zinc market deficit for the current year.

Prices also received support from declining global inventories and ongoing challenges facing mine production.

Production growth expectations cap upside

On the other hand, expectations for higher output from several major producers continued to limit zinc's upside potential.

Sweden's Boliden plans to restart production at the Garpenberg mine during the second quarter, while Japan's Mitsui Mining & Smelting expects refined zinc production to increase by 3.2% during the first half of fiscal year 2026-2027.

Global zinc market data also showed that the supply surplus narrowed significantly in March, indicating an improving balance between supply and demand compared with previous periods.

The Price

From a technical perspective, the market is witnessing long liquidation activity, with open interest declining 7.16% alongside lower prices.

Zinc faces initial support at 364.0, followed by a second support level at 361.9.

On the upside, resistance stands at 369.4, and a break above that level could pave the way for further gains toward 372.7.