On-warrant zinc stocks in LME-registered warehouses dropped to as low as 22,850t in October 2025 — the lowest since February 2023 — and stand at approximately 43,750t currently, still representing a 75% draw since the start of the year and an 82% drop year-on-year, according to Argus data.
This persistent inventory depletion has flipped the market into pronounced backwardation. The cash-to-three-months spread on the LME surged to nearly $300/t at its peak and recently traded at around $130/t. This structure signals urgent demand for physical metal and creates challenges for term contract negotiations.
Argus reports that long-term zinc contract negotiations for 2026 in Europe are progressing more slowly than expected, with some participants reporting that discussions have yet to begin. Most European market participants expect next year's long-term premiums to settle near $220/t, but at least one major producer is pushing for $250/t.
The backwardation is causing real physical market stress. European SHG in-warehouse Rotterdam premiums were assessed at $230-260/t. In the U.S., spot and long-term premiums have been trading between 18-21 c/lb ($396-463/t). These elevated physical premiums confirm that the tightness is not just a financial market phenomenon.
Trading Economics reports that LME zinc inventories declined sharply to a one-month low in early June, with parallel drawdowns on the Shanghai Futures Exchange. Ongoing mine disruptions have further constrained immediate supply, keeping the market in a state of elevated price sensitivity.
Zinc backwardation is a clear signal to secure physical supply now. With LME stocks at critically low levels and backwardation persisting at $130/t, waiting for price dips carries material risk. Lock in Q3-Q4 volumes at fixed premiums. If you have pricing leverage, push for terms tied to the cash-3M spread narrowing below $50/t as a condition.