Zinc Futures Fall on Weak China Data

Zinc futures declined to around $2,830 per tonne in mid-August, as a wave of underwhelming economic data from China fueled concerns over softening demand in the world’s largest consumer of zinc. Industrial production growth decelerated to a seven-month low in July, from a recent three-month high. In addition, retail sales growth lost momentum, hitting a six-month low, while the unemployment rate edged up to its highest level in four months. On the supply front, prices faced additional downward pressure as Chinese smelters scaled back operations due to persistent overcapacity and heavy rainfall in Southern regions. Additionally, Teck Resources’ Red Dog mine posted a 20% drop in Q1 output, while Nyrstar announced a 25% annual cut. Meanwhile, despite a 90-day extension of the US-China tariff truce providing some support ahead of the seasonal demand peak in September, the continued contraction in China’s manufacturing sector underscores the vulnerability of overall demand.