Zinc prices initially dropped and then increased, with attention now shifting to upcoming U.S. inflation data

Zinc market is currently weak on both supply and demand fronts. Domestic zinc concentrate production fell to 313,800 mt in June due to lower ore grade, floods and maintenance. While zinc concentrate import window was open, large inflows are unlikely due to shipping schedules and overseas smelter demand. Port self-pickup zinc concentrate TC have fallen below 2,000 yuan/mt in metal content, with imported concentrate TC less than zero, and domestic concentrate TCs have dropped to a historical low near 2,000 yuan/mt in metal content. Additionally, due to the ongoing mine shortage and low profitability, domestic smelter production is expected to decrease by nearly 40,000 mt MoM in July to 507,000 mt. Smelter raw material inventory is down to 16.87 days, and excluding by-products and sulfuric acid, losses are around 1,600 yuan/mt. This mine shortage is directly impacting smelters, perpetuating the weak supply-side trend. On the consumption side, despite favorable policy expectations from the 20th Third Plenary Session, market response has been subdued. Large-scale bond issuances and trillion yuan investments have not been fully rolled out, and end-user orders remain low. The off-season impact is clearly visible across galvanizing, die-casting, and zinc oxide sectors. Additionally, high temperatures and rainy conditions are hampering outdoor construction, with rebar and HRC data continuing to show weak performance. Exports are further challenged by rising ocean freight costs, fewer ships, and trade barriers, resulting in a generally weak export performance. With supply reductions, the social inventory rising to a historical high of 200,000 mt also points to weak consumption. While strong support from raw materials exists, weak consumer demand is putting downward pressure on zinc prices. It's important to monitor guidance from macroeconomic sentiment.