Why zinc is defying the gravity pulling other base metals down
While copper and aluminum have retreated from their 2026 highs, zinc has held steady above $3,500/mt and even gained ground. The divergence reflects a market that has alreadypriced in the demand concerns and is now focused on supply constraints that are intensifying faster than anticipated.
The International Lead and Zinc Study Group (ILZSG) revised its 2026 market balance forecast at its October 2025 meeting, projecting a 185,000-tonne refined metal deficit, widening from 120,000 tonnes in 2025. The primary driver is not demand — it is concentrate supply. Global zinc mine production is expected to grow only 1.2% in 2026 to 12.8 million tonnes, well below the 3% historical trend line.
The mine supply story: closures, grades, and delays
Three major mine disruptions define the 2026 zinc narrative. First, MMG's Dugald River mine in Australia experienced a 45-day suspension after a ground failure in Q1, reducing output by an estimated 35,000 tonnes. Second, Glencore's McArthur River mine in Canada is operating at reduced capacity due to lower ore grades. Third, the planned ramp-up of the Zhairem mine in Kazakhstan has been delayed by 12 months due to construction bottlenecks.
The result is that concentrate supply is the binding constraint. Smelters in China are bidding aggressively for available concentrate, pushing spot TC/RCs to $15-25/t — levels not seen since the 2015-2016 zinc bull market. When treatment charges approach zero, it means smelters are paying miners for concentrate, which is a structural signal of shortage.
Demand: a mixed picture with a steel bias
Approximately 60% of zinc consumption goes into galvanized steel for construction and infrastructure. Chinese steel production has been declining — output fell 2.8% in 2025 to 983.7 million tonnes — but the intensity of zinc use per tonne of steel is increasing as higher-grade galvanized coatings become standard. The shift toward corrosion-resistant infrastructure in China's Belt and Road projects supports demand.
Automotive demand remains stable at 0.8 million tonnes annually in Europe and North America, with no signs of substitution risk from other coatings. The galvanized steel in an average car contains roughly 10 kg of zinc, and the trend toward thicker corrosion protection in EV battery enclosures is adding 2-3 kg per vehicle.
Bull, bear, and base cases
The bull case: concentrate tightness persists through year-end, forcing non-integrated smelters to idle capacity, and the refined deficit widens beyond 200,000 tonnes. LME zinc tests $4,200/mt by Q4. JP Morgan and ING share this upside view with year-end targets of $3,800-4,000/mt.
The bear case: Chinese galvanized steel exports slow on global trade friction, and a recession reduces galvanized demand by 10%. Combined with smelters working through intermediate inventories, the deficit narrows. LME zinc pulls back to $3,000/mt.
The base case: the concentrate deficit keeps the refined market tight through Q3, but some demand normalization in China limits upside. LME zinc trades in a $3,200-3,800 range. The ILZSG outlook of a manageable deficit supports current price levels.
Zinc buyers should be on alert. The concentrate market stress will eventually translate to refined metal shortages. The key signal is TC/RCs: if spot TCs fall below $10/t, expect non-integrated smelters in China to announce output cuts within 4-6 weeks. For H2 2026 procurement: secure 40-50% of galvanized zinc requirements at current levels near $3,600/mt via fixed-price forward contracts. Keep the rest in floating to capture any pullback to $3,200/mt. The downside is limited by the concentrate cost floor — do not wait for prices to dip below $3,000/mt, as that would require a recession scenario that the current data does not support.