The zinc concentrate market is in a historic squeeze. Spot treatment charges in China have fallen into negative territory, meaning smelters are paying miners to take concentrate. Industry commentary describes spot TCs at historic lows by late May 2026, with Chinese smelters openly discussing production cuts as they compete fiercely for raw material.
The refined market tells a different story. Multiple forecasts — Fastmarkets, ILZSG, and others — project a global refined zinc surplus of roughly 271,000 t in 2026. Mine and smelter expansions globally are expected to outpace demand growth. SMM estimates China's refined zinc output in May 2026 was down 1.6% month-on-month but still up 4.5% year-on-year, with domestic inventories described as relatively high.
The regional disconnect is the key structural feature. China has significant surplus in refined zinc, with exports hitting multi-year highs in late 2025. The rest of the world faces a shortfall linked to earlier smelter problems and high energy costs that curtailed production in Europe, Japan, and Kazakhstan. Chinese exports are rebalancing the market, but at a cost — logistics, timing, and quality differences create friction.
LME inventories tell the acute story. Long-term contract analysis from SMM notes that LME zinc stocks had fallen to roughly 34,700 t, with only about 24,850 t on-warrant — barely sufficient to cover one day of global zinc consumption. Reuters similarly reported LME zinc inventories would cover less than one day of world consumption. Mining.com highlighted the biggest squeeze in decades as LME inventories plunged toward record lows.
Demand-side signals are mixed. Galvanizing demand from the steel sector remains the primary demand driver, accounting for roughly 50% of global zinc consumption. Chinese steel production is weak — April 2026 crude steel output was 86.63 Mt, the lowest April since 2018 — but infrastructure spending and renewable energy construction provide support.
Forward catalysts: the path of Chinese zinc exports is the single most important variable for LME pricing. If China exports aggressively, LME stocks can rebuild and the backwardation will ease. If China restricts exports to protect domestic margins, LME tightness could trigger another squeeze. The concentrate market will remain tight through 2027 as new mine supply struggles to reach production.
The zinc market is two markets in one. For buyers in China, domestic surplus means competitive pricing and ready availability. For buyers outside China, the LME squeeze risk is real — warrant coverage below one day of consumption means any supply disruption triggers outsized price moves. Buyers should maintain higher than normal inventory buffers, explore Chinese sourcing as a hedge against LME tightness, and watch the spread between SHFE and LME zinc as the early warning signal. A widening spread signals Chinese exports are flowing, which eases Western tightness.