FX.co ★ Zinc Pulls Back from 4-Month High

Zinc futures have declined to $2,830 per tonne, down from a four-month peak of $2,880 reached on July 24th. This drop comes as markets evaluate the demand outlook for galvanization in China, the leading consumer of zinc. The Chinese government has strengthened its commitment to reducing capacity in crucial industries to prevent oversupply and to counteract a deflationary trend among producers, with a particular focus on decreasing steel production. This reduction in steel output has consequently impacted the demand for galvanization, zinc's primary industrial application. Additionally, there is uncertainty surrounding factory demand, as indicated by China's official Purchasing Managers' Index (PMI), which continues to signal a contraction in the manufacturing sector. On the supply side, Teck Resources’ Red Dog Mine in Alaska, the largest zinc mine globally, is approaching depletion. Consequently, its mined output dropped by 20% year-on-year to 145,300 tonnes in the first quarter of the year.