Zinc Faces Downturn Due to Diminished Demand Sentiment in China

Zinc, a crucial industrial metal, has been navigating through a series of influences, including currency fluctuations, global demand shifts, and strategic interventions. In the recent market update, zinc prices experienced a decline of -0.42%, settling at 227.15. This movement was primarily shaped by the influence of a stable dollar in anticipation of forthcoming U.S. economic data. Additionally, the subdued demand outlook from China, a major consumer of zinc, contributed to the prevailing market sentiment. Despite these challenges, the market found some relief in a significant reduction in bank reserves in China, where approximately $140 billion was injected into the banking system. China's central bank strategically aimed to enhance liquidity by lowering the mandatory cash reserves held by banks.

One of the noteworthy aspects contributing to the global zinc market dynamics is China's positive trajectory in refined zinc output. In December 2023, China's refined zinc output reached 590,900 metric tons, showcasing a monthly increase of 2.05%. Moreover, there was a substantial year-on-year growth of 12.38%, indicating a robust performance in the Chinese zinc production sector. The cumulative refined zinc output for the entire year (January to December) stood at 6.622 million metric tons, reflecting a significant surge of 10.77% compared to the previous year. This surge highlights China's pivotal role in influencing the global zinc supply.

In addition to refined zinc output, the zinc alloy production sector in China witnessed an upward trend. In December 2023, zinc alloy production increased to 102,900 metric tons, marking a monthly rise of 9,600 metric tons. This positive momentum indicates the versatility of zinc applications in various industries, including manufacturing and construction.

The support level for zinc is identified at 226.2, and a breach below this level could potentially lead to a test of 225.2. This suggests a critical juncture where the market could face further downward pressure if the support level is breached. On the flip side, resistance is anticipated at 228.2, and a breakthrough beyond this level might prompt prices to test 229.2. This signifies a potential bullish trend if the resistance level is convincingly breached.

The zinc market is experiencing a complex interplay of factors that shape its trajectory. Currency influences, global demand dynamics, and strategic interventions, such as China's reduction in bank reserves, collectively contribute to the market's intricate nature. Monitoring these various factors is crucial for market participants and investors to make informed decisions. As the global economy evolves, the zinc market will continue to respond to these dynamics, presenting both challenges and opportunities for stakeholders in the industry.