Zinc prices edged higher on July 16, with LME three-month metal settling at $3,560.50 per metric ton, up 0.34% on the session and maintaining a position near the four-year highs reached earlier in July. The market is navigating a complex set of cross-currents: a cascade of smelter disruptions is tightening physical supply, while rising Chinese refined output and modest SHFE inventory builds are capping the upside. The net result, per the International Lead and Zinc Study Group (ILZSG), is a refined zinc deficit of 19,000 tonnes for 2026 — small in absolute terms but significant in a market where visible inventories are already thin.
The supply disruption list is unusually long for a single quarter. A fire at a sulphuric acid unit at a South Korean zinc smelter in mid-July added to an already strained supply picture. Glencore's Kazzinc operation in Kazakhstan remains at reduced capacity following an earlier explosion. Nexa Resources' Cajamarquilla smelter in Peru, one of the largest in the Americas, is still in the process of gradually restarting after fire damage. Boliden's Garpenberg mine in Sweden, a major source of zinc concentrate, faces uncertain output following seismic activity. Each disruption individually is manageable. Collectively, they have removed enough metal from the market to sustain prices at four-year highs.
The concentrate market is even tighter than the refined market. Treatment charges (TCs) — the fees smelters charge miners to process concentrate into refined metal — have collapsed to near zero in the spot market, signaling a severe shortage of mine supply relative to smelting capacity. This is the market's most reliable signal: when TCs approach zero, mines are not producing enough concentrate to feed the world's smelters. The structural driver is underinvestment in new zinc mine capacity over the past five years. Several major mines — including Glencore's Lady Loretta in Australia and MMG's Dugald River — have been depleting, and replacement capacity has not kept pace.
China's role complicates the global picture. Chinese refined zinc production rose 9.4% year-over-year in May, a significant increase that has partially offset the ex-China supply losses. But China's smelters are processing imported concentrate, and with TCs near zero, their margins are being squeezed. If low TCs persist — and the concentrate shortage suggests they will — Chinese smelters may cut run rates in the second half of 2026, removing the one offsetting supply force that has kept the market from a more severe deficit.
On the demand side, manufacturing data has been resilient. PMIs in China, Europe, and the US all showed improvement in June, supporting the outlook for zinc consumption in galvanized steel — which accounts for roughly 60% of global zinc demand. Construction activity in China, while structurally declining, has stabilized at levels that continue to absorb significant zinc volumes. The US infrastructure spending cycle, though progressing slower than initially projected, is providing a steady source of demand for galvanized products.
StoneX sees zinc prices pulling back from current levels over the course of 2026, arguing that increasing supply and a modest demand outlook should ease tightness. Their view is that the current price level overstates the structural deficit and that smelter restarts, once completed, will restore adequate supply. The counter-argument, supported by the ILZSG deficit forecast and the TC signal, is that the mine supply shortage is structural and will constrain refined output even as smelters come back online. You cannot smelt concentrate that does not exist.
The South Korean smelter fire, while described as limited to a sulphuric acid unit, is emblematic of the broader vulnerability in the zinc supply chain. The global zinc smelting industry is concentrated — the top ten smelters account for roughly 45% of global refined output. When several of them face simultaneous disruptions, as is happening now, the market has no slack to absorb the loss. The LME warehouse system is not providing a buffer; zinc stocks remain well below the five-year average.
The zinc market is structurally tight, and the concentration of smelter outages makes the supply situation fragile. Even if all disrupted smelters resume normal operations, the underlying concentrate shortage — signaled by near-zero treatment charges — will cap refined output growth. Procurement actions: (1) Lock in Q3 and Q4 zinc volumes at current levels. At $3,560/MT, you are buying near the four-year high, but the supply risk is asymmetric: a further disruption could push prices toward the 2006 all-time high of $4,603/MT. The downside is limited by the structural deficit. (2) Diversify your refined zinc suppliers beyond Asia. The concentration of smelter disruptions in Asia-Pacific (South Korea, China, Kazakhstan) exposes buyers in the region to delivery risk. European and North American smelters, while facing higher energy costs, have been more operationally stable. (3) Monitor treatment charges as a leading indicator. If spot TCs remain near zero through Q3, expect Chinese smelter cutbacks in late 2026. That is your early warning to accelerate purchases. (4) For galvanized steel buyers, the zinc cost pass-through is becoming material. Negotiate zinc surcharge formulas with your steel suppliers now, before the next price spike. A transparent formula tied to LME zinc reduces the risk of opaque markups during tight markets.