Price Trends

According to monitoring by the SunSirs Commodity Market Analysis System, as of May 25, the price of 0# zinc stood at 24,814 RMB/ton—an increase of 0.93% compared to the price of 24,586 RMB/ton recorded on May 18.

Fundamentals

The defining characteristic of zinc price movements last week was a dynamic of "resistance above, support below": upward momentum was stifled by the off-season for downstream consumption and elevated social inventories, while strong support was established on the downside by tight raw material supplies from mines and expectations of reduced smelting output. Consequently, the market lacked room for any significant correction, maintaining a pattern of high-level volatility throughout the week.

Supply Side

Last week, the narrative of tightening supply in the zinc market continued to gain momentum, serving as the core support for zinc prices; meanwhile, various high-frequency data points corroborated the deepening shortage of raw materials. First, treatment charges (TCs) for zinc concentrates continued to plumb new lows; domestic TCs fell to 400 RMB per metal ton, while imported TCs dropped to -56.25 USD per dry ton—both hovering at historical lows. Consequently, smelter profit margins narrowed drastically, with some even slipping into the red, dampening production enthusiasm and fueling expectations of increased maintenance shutdowns and output cuts. Second, raw material inventories experienced an accelerated decline; domestic zinc mine inventories fell below a 20-day supply buffer, while stocks of imported ore at ports trended lower in tandem. With smelters facing tight raw material reserves, the scope for increasing refined zinc output has been directly constrained, leading to forecasts that domestic refined zinc production will decline month-on-month in May. Third, supply disruptions overseas compounded the situation; specifically, a fire at the Gajamarquilla zinc smelter in Peru resulted in reduced output. This led to a marginal tightening of the global refined zinc supply, further reinforcing expectations regarding the shortage of zinc concentrates.

However, the short-term spot supply of refined zinc remains relatively ample. This week, smelters implemented only marginal production cuts, and no concentrated maintenance activities were observed; consequently, the contraction in supply has not yet translated into a significant drawdown in spot inventories. At present, market support is primarily manifesting at the level of sentiment and expectations.

Demand Side

Since mid-May, domestic zinc consumption has officially entered its traditional off-season. Operating rates across the entire downstream sector have declined in tandem, creating a distinct bearish pressure on the demand side—the primary reason why zinc prices are struggling to break out to the upside.

Market outlook

Based on an assessment of the fundamental supply-demand dynamics, zinc prices are expected to maintain a pattern of high-level volatility with a slight downward bias in the short term. The market is likely to trade within a defined range—caught in a stalemate between upward and downward movements—and currently lacks any clear directional momentum. Given the absence of definitive trend signals, a range-trading strategy is recommended as the primary approach, supplemented by a wait-and-see stance.

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