FX.co ★ Zinc Rebounds to Extend Upward Momentum

Zinc futures have climbed to $2,800 per tonne in August, continuing their rebound from the one-year low experienced in early April. This recovery has been driven by the potential for increased demand, which has helped to balance out indications of strong supply. The base metals market received a boost following the Chinese government's announcement of a significant hydroelectric power project valued at CNY 1.2 trillion, slated for development over the next decade. This initiative is expected to drive up the country's steel demand, along with zinc, due to the extensive use of galvanization in such infrastructure undertakings. Concurrently, there have been reports that the Chinese government may implement capacity restrictions for zinc smelters in line with similar reforms applied to other industrial metals. This is part of a strategic effort to combat deflationary pressures faced by producers. Compensating for declining ore grades, Teck Resources' Red Dog mine in Alaska, recognized as the world’s largest zinc mine, reported a 17% increase in output in the second quarter, reflecting its resilience despite nearing the depletion of its reserves.