LME zinc is holding ground at $3,612.5/mt after leading the base metals complex higher last week. The metal has gained 3.2% in June, the strongest performance among LME base metals, fueled by a simple reality: LME warehouse inventories at 123,775 tons represent less than five days of global zinc consumption estimated at 28,000 tons per day.
The stocks story has a caveat. Canceled warrants — metal earmarked for delivery out of warehouses — represent 28% of total LME zinc inventory. Most of the canceled tonnage is concentrated in Singapore and Port Klang, suggesting Asian buyers are pulling metal for physical consumption. If the cancelation rate accelerates, on-warrant (available) stocks could fall below 80,000 tons, which would trigger a more aggressive cash premium.
SHFE zinc fell 0.97% to ¥24,085/mt ($3,305/mt equivalent), underperforming LME. Chinese galvanizers, the largest zinc-consuming sector, are reporting margin compression as hot-dip galvanizing capacity utilization has slipped to 72%, down from 78% in April. Steel mills are pushing back on galvanizing fees, squeezing the processing margin that zinc buyers in the steel supply chain depend on.
Mine supply remains the bullish anchor for zinc. Peru's zinc mine output fell 4.8% year-over-year in Q1 2026, per the Ministry of Energy and Mines, as lower ore grades at Antamina and Volcan's Cerro de Pasco complex reduced contained zinc production. In Australia, heavy rainfall in Queensland disrupted Glencore's Mount Isa operations in May. Global zinc mine production was essentially flat in Q1, while refined production grew 2.3%, widening the concentrate deficit.
Treatment charges for spot zinc concentrate have fallen to $40-55/dmt, down from $140-170/dmt a year ago. The ILZSG forecasts the global refined zinc market in a 158,000-ton deficit for full-year 2026, revised from a 120,000-ton deficit in April. If the ILZSG is right, LME stocks will need to cover that deficit, and 123,775 tons won't be enough.
LME zinc stocks at 123,775 tons are not a comfortable buffer for a market the ILZSG sees in a 158,000-ton deficit this year. At current consumption rates, stocks are 4.5 days of cover. If canceled warrants draw another 30,000-40,000 tons out of LME sheds over the next month, cash premiums will spike. For buyers of SHG zinc or zinc alloy, lock in Q3 volumes now. The mine supply pipeline is still constrained and TCs at $40-55/t mean smelters will eventually cut runs, tightening refined supply.