Zinc touched a two-week low on Wednesday on concerns that Chinese smelters will ramp up output, but prices were supported by a shortage of immediately available material on the London Metal Exchange (LME). Benchmark zinc on the LME closed 0.4 percent up at $2,873 a tonne after slipping to $2,842, its lowest since March 26.
Deficits have driven LME stocks to record lows and pushed zinc, used to galvanize steel, to a nine-month high of $2,958 on April 1.
But the supply situation is expected to change rapidly after Chinese treatment charges soared to $240 a tonne from a low of $12.50 at the start of 2018.
Smelters are likely to seize the opportunity to make money by ramping up production in the second quarter, said Deutsche Bank analyst Nick Snowdon.
Headline stocks in LME-registered warehouses, at 52,550 tonnes, are down from 129,000 tonnes at the start of the year.
The premium for cash zinc over the three-month contract has shot to $74.50 from close to zero in early February, suggesting a shortage of nearby material.
However, stockpiles in warehouses monitored by the Shanghai Futures Exchange (ShFE), at 108,772 tonnes, are up from about 20,000 tonnes at the start of the year.
Global mine supply of zinc is expected to rise 6.4 percent this year to 13.87 million tonnes, according to the International Lead and Zinc Study Group (ILZSG).
But higher mine production has been slow to feed through to the refined market, with the ILZSG showing a 384,000 tonne deficit in 2018 and another shortfall in January.
The IMF cut its forecast for world economic growth this year to 3.3 percent from 3.5 percent and said the chances of further cuts are high.
US President Donald Trump threatened to impose tariffs on $11 billion worth of European Union products, opening a new front in his trade war.
An indigenous community voted to suspend its two-month road blockade of Las Bambas, a large Peruvian copper mine, for two days until the government visits the region on Thursday.
Emirates Global Aluminium said its Al Taweelah alumina refinery in Abu Dhabi had commenced operation. It is expected to produce 2 million tonnes of alumina a year once fully operational.
LME copper ended 0.4 percent down at $6,464 a tonne, aluminium fell 0.8 percent to $1,864, lead slipped 1.1 percent to $1,953.50 and tin eased by 0.1 percent to $20,850. Nickel did not trade but was bid 0.1 percent lower at $13,230.