FX.co ★ Zinc Futures Fall on Weak China Data

Zinc futures fell to approximately $2,830 per tonne in mid-August, spurred by disappointing economic indicators from China, raising alarms about diminishing demand in the country, the world's largest zinc consumer. Industrial production growth slowed to a seven-month low in July, following a recent peak over the past three months. Additionally, retail sales growth decelerated to a six-month low, and the unemployment rate increased to its highest level in four months. On the supply side, zinc prices experienced further downward pressure. Chinese smelters reduced operations due to ongoing overcapacity and severe rainfall in the southern regions. Compounding these challenges, Teck Resources reported a 20% reduction in output from its Red Dog mine for the first quarter, and Nyrstar announced a 25% cut in annual production. Though the 90-day extension of the US-China tariff truce offers some relief in anticipation of the seasonal demand peak in September, the persistent contraction in China's manufacturing sector highlights the fragility of overall demand.