LME three-month zinc held steady at $3,565/mt through Friday's session, one of the few base metals to avoid a weekly decline. The resilience is attributed to concentrate market tightness, which is constraining refined output and keeping inventories on a downward trajectory.
Spot treatment charges for zinc concentrate fell to $65/dmt this week, down from $80/dmt at the start of May. The squeeze reflects declining mine output from key sources: Glencore's Lady Loretta mine in Australia is ramping down, and several Peruvian operations faced output disruptions from labor actions.
The TC compression is hitting Chinese and Korean smelters hardest. Korea Zinc, the world's largest zinc smelter, announced a 5% run-rate reduction for Q3, citing concentrate availability. Chinese smelters are paying spot TC rates below their breakeven of approximately $70/dmt, putting margins under pressure.
LME zinc inventories fell 1.2% on the week to 218,000 tonnes, reversing three weeks of modest builds. Canceled warrants rose to 22% of total, signaling that material is being earmarked for physical delivery. The largest draws were in New Orleans and Antwerp.
Zinc's supply-side tightness provides a floor near $3,500. Buyers should use dips to $3,450-3,500 as buying opportunities for Q3 coverage. The concentrate squeeze takes 2-3 months to impact refined output, so the tightness is likely to persist into September.