Core Viewpoint - The zinc market is currently experiencing a dual supply increase in both zinc ore and zinc ingots, with significant implications for pricing and inventory levels. However, demand remains weak, and future consumption expectations are uncertain due to various macroeconomic factors and industry dynamics [4][6][10]. Supply Side: Zinc Ore and Ingots - Zinc ore supply has increased significantly, with net imports in China from January to June rising by 48% year-on-year, contributing to a total supply increase of 13.5% during the same period [4] - Current zinc concentrate port inventory stands at 275,000 physical tons, while factory inventory is at 599,000 physical tons, marking a year-on-year increase of 28,680 tons [4] - Domestic zinc ingot production began to rise in June, with June output reaching 585,100 tons, a year-on-year increase of 7.2% and a month-on-month increase of 6.5% [4] - The average domestic treatment charge (TC) for zinc concentrate is 3,800 RMB/ton, while the import TC index is 76 USD/dry ton, both showing significant increases from last year [4] Demand Side: Weak Reality, Marginally Strong Expectations - Current operational rates for downstream enterprises are below last year's levels, with galvanized sheet production down by 3% and die-casting zinc alloy production down by 4.6% year-on-year [6] - Strategic inventory buildup is occurring among some enterprises due to falling zinc prices, but actual consumption may be weaker in the second half of 2025 due to preemptive actions taken in response to price drops and tariff policies [6] - A major hydropower project in the Yarlung Tsangpo River region, with a total investment of 1.2 trillion RMB, is expected to marginally boost zinc consumption, primarily for corrosion protection in metal structures [6] Market Sentiment and Financial Disturbances - The Trump administration's influence on the Federal Reserve's monetary policy is increasing, raising expectations for monetary easing, which provides some support for zinc prices [8] - Domestic policies aimed at stabilizing growth and eliminating outdated production capacity have sparked a bullish trend in commodity markets, positively impacting zinc as it is closely related to sectors like infrastructure and real estate [8] - After July delivery, registered zinc ingot warehouse receipts on the Shanghai Futures Exchange exceeded 10,000 tons, indicating a significant reduction in structural risks [8] Supply-Side Reform and Market Outlook - The current zinc market differs from the 2016 cycle, as it is characterized by an oversupply of zinc ore, with average profits still positive at 4,300 RMB/ton [10] - Despite the introduction of policies aimed at stabilizing growth and eliminating outdated capacity, the zinc industry is not resonating with macroeconomic policies, making sustained price increases challenging [10] - If speculative sentiment cools and the macroeconomic environment weakens, there remains a significant risk of downward pressure on zinc prices [10]