LME three-month zinc prices surged to $3,430 per tonne in recent trading, approaching the highest levels in years, as a dramatic drawdown in exchange inventories exposed the fragility of the global zinc supply chain. LME on-warrant stocks have fallen to approximately 120,000 tonnes, down from 230,000 tonnes at the start of 2025 and from 300,000 tonnes in April 2021. Combined LME and SHFE inventories are now below 150,000 tonnes, a level that historically precedes acute supply tightness and price spikes.
Treatment charges (TCs) for zinc concentrate have fallen below breakeven levels for many smelters, with benchmark TCs at approximately $80 per tonne in 2025 and forecast to reach $160/t in 2026. The persistent low TC environment reflects a structural shortage of mined concentrate relative to smelting capacity, forcing smelters to accept negative margins to secure feed. European smelters have responded with reduced operating rates and extended maintenance shutdowns, further tightening refined metal availability.
The inventory crisis is compounded by regional imbalances. LME zinc stocks in Asian warehouses, particularly in Malaysia and Singapore, have been drawn down aggressively to satisfy Chinese demand. However, China's refined zinc imports have declined as domestic smelter production rose to a 17-month high in August 2025, with the Kunlun smelter expansion adding 560,000 tonnes per year of capacity. This dynamic has shifted the locus of tightness from Asia to Europe, where LME stocks in Rotterdam and New Orleans are near depletion.
The combined stock level below 150,000 tonnes is a red flag for procurement teams. Extend zinc contract coverage to 6-9 months to hedge against potential price spikes. Consider alternative suppliers in regions with better stock coverage, and evaluate galvanizing alternatives where technically feasible.