Zinc Prices Decline Despite China's Fresh Stimulus Initiatives

Zinc prices have shown a marginal decline of -0.11%, settling at 221.4, despite China's vigorous efforts to invigorate its economy through amplified budget deficit ratios and an injection of sovereign debt. While the reduction in production in Europe and Australia, predominantly due to elevated energy costs, did lend some support to the market, zinc has seen a year-to-date decrease of 20%. This pronounced decline can be primarily ascribed to a scenario in which supply has eclipsed demand.

The global demand for refined zinc in 2023 is currently forecasted to rise by 1.1%, reaching a total of 13.59 million tons. This adjusted estimate is marginally lower than the one put forth in April and is a reflection of the impact of stricter monetary conditions. In September 2023, China's production of refined zinc experienced a month-on-month upswing of 3.31% and an impressive year-on-year growth of 7.94%, culminating in a cumulative output of 544,000 metric tons. While this growth is noteworthy, it did fall slightly short of industry expectations. The cumulative production of refined zinc from January to September amounted to 4.85 million metric tons, marking a significant 9.84% increase in comparison to the same period in the previous year. Furthermore, domestic zinc alloy production in September witnessed an upturn, reaching 88,200 metric tons, signifying a notable increase of 2,000 metric tons in comparison to the previous month.

From a technical perspective, the zinc market underwent a fresh wave of selling, accompanied by a 2.64% surge in open interest, which settled at 3699, while prices concurrently experienced a decline of -0.25 rupees. In terms of anticipated market movement, it is expected that the market will find support at the level of 220.7, with the potential for a test of the 220 threshold if this level is breached. Conversely, resistance is anticipated at 222.2, and the successful breach of this threshold may lead to price tests at 223.

This multifaceted assessment of the zinc market underscores the complex interplay of domestic and global factors that continue to shape its trajectory. Despite China's persistent endeavors to stimulate its economy, zinc prices encountered a modest decline. Factors such as escalated production costs in Europe and Australia, driven by elevated energy expenses, did provide some respite to the market. However, the overarching trend in zinc prices throughout the year, marked by a 20% decrease, can be chiefly attributed to a supply surplus outstripping demand. These factors collectively contribute to the nuanced dynamics of the zinc market.