Key Moments:
- Zinc futures rose above $2,660 today.
- Positive sentiment emerged following a US-China agreement concerning exports.
- Weak manufacturing demand in China kept pressure on zinc, with Shanghai prices hitting a multi-month low.
Market Rally Fueled by Diplomatic Progress
Commodity markets witnessed zinc futures advance by 0.43% on Wednesday to climb above the $2,660 mark. This marked a reversal from the losses recorded earlier in the month. This modest rebound came as traders responded to encouraging signals from trade discussions between US and Chinese officials in London. The framework, which is designed to improve export control coordination and stabilize commercial relations, lifted sentiment across the broader industrial metals sector and is currently awaiting approval from Donald Trump and Xi Jinping.
Chinese Demand Fails to Keep Pace
Despite renewed optimism in global markets, zinc’s fundamentals remain burdened by sluggish industrial demand, especially in China. Shanghai prices, in particular, fell for a third consecutive session. The figure sank to 21,845 yuan per tonne, the lowest level since April.
Concerns about declining consumption also intensified due to a second consecutive month of contraction in Chinese manufacturing activity. This prompted traders to become more cautious, reducing speculative positions.
May saw a 1% month-on-month decline in China’s refined zinc output, though it registered a slight year-on-year increase of 2%. More broadly, cumulative production for the first five months of the year barely grew, with the 0.5% figure falling short of the forecasts by market participants.
As per data from the International Lead and Zinc Study Group (ILZSG), the global zinc market’s excess supply fell to 23,700 metric tons during March. However, the surplus recorded during Q1 stood at 143,000.
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