Zinc dropped as China's refined zinc output rose by 11.14% m-o-m in October.

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Zinc dropped as China's refined zinc output rose by 11.14% m-o-m in October.

Zinc prices experienced a modest uptick, closing 0.4% higher at 227.25, driven by China's robust refined zinc output in October, surpassing expectations with a month-on-month growth of 11.14% and a year-on-year increase of 17.6%. The market sentiment was buoyed by the anticipation of extended support measures for China's economy, limiting downside risks. Notably, the global zinc market shifted from a surplus of 28,000 metric tons in August to a deficit of 15,400 tons in September, according to the International Lead and Zinc Study Group (ILZSG).

However, the overall surplus for the first nine months of the year increased substantially to 475,000 tons, compared to a surplus of 47,000 tons in the same period last year. Zinc inventories in Shanghai Futures Exchange warehouses declined by 12.1%, signalling tightening supply. Conversely, London Metal Exchange (LME) data revealed a significant increase in zinc stocks, more than tripling in a week to the highest levels in over two years. Nyrstar's decision to temporarily close mines in the U.S. due to inflation impacts added to concerns about future zinc production, as did operational halts in Ireland and Portugal. Despite these supply-side challenges, zinc prices remained around 15% lower since the beginning of the year.

Technical analysis suggests short covering in the market, with open interest unchanged at 3010. Zinc's current support level is at 226, with a potential test of 224.8 if breached, while resistance is anticipated at 228, and a move above could lead to a test of 228.8.

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