Zinc has been the stealth outperformer in the base metals complex during 2026, not because of spectacular price gains but because of the persistence of a supply-side story that should have resolved by now and has not. LME zinc at $3,591/mt on July 21 is up only 0.5% on the day but sits roughly 20% above where most analysts expected it to be at mid-year, when the consensus called for a surplus-driven decline toward $3,000.
The surplus never materialized. The International Lead and Zinc Study Group (ILZSG) reported that 2025 actually recorded a 33,000-tonne refined zinc deficit — not the 148,000–271,000-tonne surplus it had forecast in October 2025. For 2026, the ILZSG now projects a 19,000-tonne deficit, a sharp reversal from earlier projections of a 271,000-tonne surplus. The primary driver: mine supply growth has decelerated from 5.4% in 2025 to a forecast 0.3% in 2026, leaving smelters short of concentrate.
The concentrate market is where the zinc price story lives. Spot treatment charges (TCs) — the fee smelters charge miners to process concentrate into refined metal — are trading at $50–70/dmt in the Asian market, well below the 2025 benchmark of $80/dmt. When TCs are low, it means concentrates are scarce relative to smelter capacity. The 2025 benchmark of $80/dmt was already a record low, and spot TCs have fallen further, indicating that the mine supply response the market was counting on has failed to arrive. The annual benchmark negotiation for 2026 has been contentious; Teck Resources and Korea Zinc, the traditional benchmark setters, have not yet reached agreement, and traders expect the final number to land between $60 and $80/dmt.
On the mine supply side, the recovery that began in late 2024 and continued through 2025 has stalled. Several key mines that were expected to ramp up in 2026 have faced delays: the Ozernoye mine in Russia (originally expected to add 150,000 tonnes of zinc-in-concentrate annually) remains below capacity due to sanctions-related equipment shortages. The Neves-Corvo expansion in Portugal and the Aripuanã ramp-up in Brazil have delivered below guidance. Meanwhile, Glencore's 2025 production cuts — the company idled portions of its Mount Isa and McArthur River operations in Australia — continue to constrain supply. Glencore produced 12% less zinc in 2025 than in 2024, and its 2026 guidance implies only a partial recovery.
Demand for zinc remains anchored by galvanized steel production, which accounts for roughly 60% of global zinc consumption. Chinese galvanized steel output grew 3.5% in H1 2026 according to the China Iron and Steel Association, supported by infrastructure spending and automotive manufacturing. European galvanizing demand has been weaker, growing just 1.2% as the construction sector remains sluggish. But the net effect is positive: global zinc demand is forecast to grow 1.3% to 14.0 million tonnes, slightly outpacing refined production of 13.99 million tonnes.
LME zinc inventories have been declining steadily. Total stocks stood at roughly 180,000 tonnes in mid-July, down from 260,000 tonnes at the start of 2026. Cancelled warrants represent about 25% of the total, indicating continued off-take. SHFE zinc inventories are at 24,630 tonnes (down 0.9%), a multi-year low. The combined visible inventory across exchanges covers roughly 7 days of global consumption — thin by historical standards.
Analyst views on zinc are cautiously bullish, with the emphasis on caution. JP Morgan forecasts zinc averaging $3,400–3,500/mt for the remainder of 2026, warning that a global manufacturing slowdown would hit zinc harder than copper or aluminum because of its concentration in construction and automotive end-uses. ING is more constructive, targeting $3,700/mt by year-end on the thesis that concentrate tightness will persist and eventually force smelter curtailments. Macquarie takes a contrarian view: they see zinc falling to $3,100/mt in Q4, arguing that the Ozernoye mine will eventually ramp up and that Chinese smelters are building concentrate inventories that are not yet visible in exchange data.
The key catalysts for zinc in H2 2026 are mostly supply-side. The Teck-Korea Zinc benchmark TC negotiation will set the tone: a settlement below $80/dmt would confirm that miners hold the bargaining power, supporting prices. Glencore's H1 2026 production report (due in early August) will indicate whether the company is maintaining or increasing its production cuts. On the demand side, Chinese infrastructure spending post-Politburo meeting in late July is the main variable — every 1% increase in Chinese construction activity adds roughly 60,000 tonnes of zinc demand.
Zinc buyers are in a better position than copper buyers but worse than they were six months ago. The market is tight but not panicked, which creates a tactical window. (1) For H2 2026 spot purchases: zinc at $3,500–3,600 is not cheap by historical standards, but the ILZSG deficit forecast and declining inventories suggest the risk is to the upside. If you have unhedged Q4 volumes, cover them now. (2) For 2027 annual contracts: negotiate early. The trajectory of TCs tells you that miners, not smelters, control the market. Smelters are operating on thin margins and will seek to pass costs through. A fixed-price contract at or near $3,400/mt for 2027 is competitive. (3) Watch the Teck-Korea Zinc benchmark TC negotiation. A low settlement ($60–70/dmt) is a leading indicator that LME zinc is heading toward $3,800+. If you see that headline, accelerate your 2027 contracting. (4) For galvanizers and steel coaters: zinc represents 2–5% of your input costs but 100% of your corrosion protection. The cost of a zinc supply interruption far exceeds the cost of hedging. Consider a costless collar structure: buy a $3,200 floor funded by selling a $4,200 cap. This protects against a sharp rally while capping your upside exposure. (5) Monitor the Ozernoye restart. Macquarie's bearish view hinges on this mine, and any confirmation of a ramp-up would open a tactical window to lock in lower prices. But do not bet on it — Russian mining projects under sanctions have a consistent record of under-delivering against timelines.