Zinc prices remained well-supported at $3,612/mt on LME cash settlement, with three-month at $3,628/mt. The $16/mt backwardation reflects sustained nearby tightness as LME registered inventories hover near multi-year lows.
Total reported zinc inventories across LME and SHFE warehouses stand at approximately 156,000 tonnes, down from a peak of over 400,000 tonnes in mid-2024. The inventory drawdown has been the primary driver of zinc's rally from $2,800/mt levels seen earlier in the cycle.
On the supply side, global zinc mine production has been constrained by mine closures and depletion. Major operations at Gamsberg (South Africa), Tara (Ireland), and several Chinese mines have faced operational challenges, reducing concentrate availability. Spot zinc concentrate TCs have tightened to $70-90/dmt from $150+/dmt a year ago.
Demand from the galvanizing sector — which accounts for over 50% of zinc consumption — remains steady, supported by infrastructure spending in the US, India, and Southeast Asia. Chinese galvanized sheet production rose 3.2% year-on-year in May.
The zinc market is expected to shift from a small surplus in 2025 to a deficit in 2026, driven by mine supply constraints and steady demand growth from construction and automotive sectors.
Zinc's tight inventory picture suggests limited downside. Buyers should maintain strategic positions and use any dips below $3,500/mt as accumulation opportunities. Forward coverage of 3-6 months is advisable given the supply deficit outlook.