LME three-month zinc prices have rallied strongly from approximately $2,646/t in May 2025 to above $3,400/t in June 2026, representing nearly 30% year-over-year gains. The rally has been underpinned by critically low visible inventories — LME stocks fell from 230,000 tonnes at the start of 2025 to near depletion in late 2025 before recovering to approximately 110,000 tonnes in early 2026.
The price strength persists despite a projected global surplus. The International Lead and Zinc Study Group (ILZSG) projects a refined zinc surplus of approximately 85,000 tonnes in 2025 and an even larger overhang in 2026. This apparent contradiction — rising prices alongside a surplus — reflects a structural disconnect between the paper surplus and physical availability.
The key dynamic is regional divergence. China's ore supply has improved dramatically, with zinc ore availability up 45% year-over-year in early 2026. Chinese smelter output hit 17-month highs in August 2025, driven by the ramp-up of Kunlun smelter (adding 560,000 t/y of capacity). This has created a local surplus in China and is driving Chinese benchmark treatment charges (RCTCs) from record lows of $80/t toward $160/t.
Outside China, the picture is very different. European smelters continue to face high energy costs and reduced output. Mine closures and operational disruptions have constrained concentrate availability, leading to below-breakeven treatment charges that forced some smelters to curtail production. The result is a two-speed market: surplus in China, tightness elsewhere.
Demand growth remains modest at approximately 1%, pressured by weakness in construction and manufacturing across China, Europe, and Japan. However, electrification, grid investment, and data center construction are providing meaningful demand support. Galvanized steel demand for infrastructure projects remains a key consumption driver.
Zinc at $3,400/t reflects a market where low visible inventory is creating price anxiety despite a projected surplus. Buyers should distinguish between regional markets: Chinese domestic prices may trade at a discount, while ex-China material commands a premium. Consider sourcing strategy: Chinese SHFE contracts for Asian delivery may offer better value than LME-linked contracts. Monitor LME stock levels closely — a rebuild above 200kt could trigger a rapid price correction toward $3,000/t.