NextFin News - Zinc prices are locked in a tug-of-war between a weakening U.S. dollar and a stubborn accumulation of domestic social inventory, leaving the market in a state of volatile equilibrium as March 2026 unfolds. On the Shanghai Futures Exchange (SHFE), the most-traded 2604 zinc contract settled at 24,330 yuan per metric ton last Friday, eking out a modest gain of 0.29%. This domestic caution stands in sharp contrast to the more aggressive rally on the London Metal Exchange (LME), where zinc surged 2.88% to close at $3,323 per metric ton, fueled by disappointing U.S. non-farm payrolls data that reignited hopes for a Federal Reserve interest rate cut.
The divergence between London and Shanghai highlights a fundamental disconnect in the zinc market. While international traders are reacting to macroeconomic shifts and a softening dollar index, the Chinese market is grappling with the physical reality of oversupply. Domestic social inventories have continued to climb recently, acting as a heavy lid on price gains. This buildup suggests that the post-holiday consumption recovery has been more sluggish than many anticipated, leaving warehouses stocked while downstream buyers remain hesitant to commit to large-scale purchases.
Supply-side pressures are adding another layer of complexity to the pricing narrative. According to the Shanghai Metals Market (SMM), imported zinc concentrate treatment charges (TCs) have continued to slide, falling by $8.37 per dry metric ton to just $15.38. This decline reflects frequent disruptions in global mining operations, which have tightened the availability of raw materials. Typically, falling TCs signal a shortage of concentrate that should support refined metal prices; however, the current glut in finished zinc inventory is effectively neutralizing this bullish signal in the short term.
In the spot market, the lack of conviction is palpable. Standard domestic brands in Shanghai were recently quoted at a discount of 70 to 60 yuan per metric ton against the 2604 contract, a widening gap that underscores the weakness in immediate demand. Even high-end brands like Shuangyan are struggling to command significant premiums, often trading at parity. Downstream players, particularly in the galvanizing and die-casting sectors, appear to be holding sufficient raw material stocks for their immediate needs, leading to a week of lackluster transactions and a "wait-and-see" approach to procurement.
The technical picture reinforces this sense of stagnation. SHFE zinc is currently hemmed in by its 5-day and 40-day moving averages, while LME zinc faces stiff resistance at its 20-day moving average. Without a decisive clearing of domestic social inventory or a more robust signal from Chinese industrial activity, the metal is likely to remain trapped in its current range. The market is now focused on whether the upcoming weeks will finally deliver the seasonal demand surge required to draw down stocks and allow zinc to follow the upward trajectory of its international counterparts.
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