SHFE zinc led the base metals complex higher on Saturday, closing at 24,250 CNY/mt. The 2.56% gain was supported by the highest trading volume in three weeks, with open interest increasing 4.1%. The rally was driven by renewed infrastructure spending signals from Beijing.
Chinese zinc demand is being lifted by galvanized steel orders ahead of the June-July construction peak. Galvanized sheet output rose 4.2% year-on-year in May, according to the China Steel Industry Association. The galvanizing sector accounts for roughly 50% of Chinese zinc consumption.
Local government special bond issuance reached 3.8 trillion CNY in the first five months of 2026, up 18% year-on-year. The accelerated pace is funding infrastructure projects that are heavy consumers of galvanized steel, including bridge construction, highway expansion, and power transmission tower installation.
The SHFE rally is also supported by import economics. The arbitrage for importing zinc into China is roughly break-even at current rates, discouraging foreign material from entering the domestic market and keeping the Shanghai premium elevated.
The Chinese zinc market is being driven by fiscal stimulus, not commercial demand. Buyers should monitor the pace of government bond issuance as a leading indicator. If issuance slows in H2, the premium may compress. For now, SHFE-linked buyers are paying a justified risk premium for supply certainty.