It’s August in Australia. That means it’s time for the full-year earnings reports to come out.
Analysts and investors around the country will examine sales, margins, and guidance for clues about the year ahead.
Few expect stronger Chinese demand to be a major driver of the resources sector.
That said, recent price action appears more favourable than expected given concerns about weak Chinese gross domestic product (GDP) growth.
The zinc price chart provides an example. It’s in a steady uptrend, according to Fat Tail Investment Research trader and commentator Murray Dawes.
He included this chart in his column last week:
What’s notable about this is that zinc is in no way considered a ‘hot’ metal in the same way as, say, copper.
There’s no major narrative to sweep investors along, such as the Iran war’s impact on oil or the surge in US defence spending and the rare earths required for specialised equipment.
Industrial demand drives zinc, especially the steel sector. That means the rising price is less likely to be influenced by speculation and trader positioning.
The most likely reason for zinc’s rising price is that users are bidding more for the metal.
China is the world’s biggest steel producer. It’s hard to escape the negativity around this from the weakness in Chinese property.
Yet the zinc chart would suggest the negativity may be slightly overdone.
Iron ore, for example, remains very profitable for the major Australian producers.
And while Chinese GDP growth may be underwhelming, global growth remains on track for around 3% this year.
That’s good for Chinese exports.
Global growth supports steel, iron ore, and zinc
Analyst PK Verleger makes the following observation. He says a 1% expansion in global GDP lifts Chinese exports by 2%.
The Wall Street Journal reported in May that China’s 2025 trade surplus hit a record US$1.2 trillion ($1.7 trillion), with exports climbing to US$3.8 trillion. Growth continued into 2026, with exports up 14.7% in the first quarter compared with the same period last year.
China is also able to weather the current energy disruption better than most other countries.
It has domestic coal for power and a large strategic stock of crude oil and refined products to moderate the fallout from the Middle East.
The Wall Street Journal recently reported that Chinese crude oil imports fell 40% year-on-year by June following the closure of the Strait of Hormuz.
China is likely trying to keep the price of oil down to protect its export markets and global growth.
That’s likely good news for industrial metals like zinc.
Can silver retake US$100 ($142) per ounce?
An important characteristic of zinc is that it is often mined alongside other metals, particularly lead and silver, because the ore bodies commonly form that way.
That means the economics of those metals are important too. If the price of silver rises too, alongside zinc, all the better for the producing miner.
One producer is Polymetals Resources (ASX:POL).
Its major output is currently silver, but it also generates revenue from lead and zinc, plus even modest amounts of gold.
It operates the Endeavor Mine in New South Wales. It’s located in the Cobar Basin, with five other operational mines nearby.
There is a dynamic quarter coming up for Polymetals.
Management told the market back in July at the quarterly update that:
“The June quarter marked a significant step forward for the company’s exploration strategy. Work is focused on adding mineable inventory within the existing Endeavor mining complex, while building a pipeline of regional prospects to support long-term organic growth.”
Of course, the current rally in zinc should provide a helpful revenue boost. There’s also the possibility for higher silver prices. Silver went above US$100 per ounce back in January. It has since fallen substantially alongside declining gold prices.
Any upswing in precious metal prices would be a welcome boost to the Australian mining industry, including Polymetals. Whether gold and silver rise, remain stable, or fall remains to be seen.
Write to Callum Newman at Mining.com.au
Images: Fat Tail Daily & Polymetals Resources
