LME zinc inventories are flashing a rare warning signal. At roughly 110,000 tonnes, visible stocks have collapsed by more than half since the beginning of 2025, when they stood at 230,500 tonnes. This depletion reflects sustained short-term demand draws and logistical bottlenecks that have drained available metal from exchange warehouses at a pace not seen in years.
The price has responded accordingly: LME three-month zinc continues to find support at its 40-day moving average, with the market oscillating in a $3,200–3,400 per tonne range. Bulls point to the stock trajectory as evidence that the market is materially tighter than headline supply-demand balances suggest.
Yet the forward view tells a very different story. A wave of smelter expansions across Europe and Asia is expected to deliver substantial new production capacity through 2026 and 2027. Refined zinc output is forecast to grow faster than end-use demand from construction, automotive, and infrastructure sectors, pushing the global refined zinc market into surplus.
This creates a structurally unusual situation: crisis-level visible stocks coexisting with a projected surplus. The divergence is partly explained by regional imbalances — Chinese metal is increasingly being shipped to LME warehouses, but the pace of delivery has yet to catch up with immediate consumption needs. Market participants are watching closely for signs that Chinese exports are accelerating, which would begin to refill exchange inventories and validate the surplus thesis.
The clock is ticking. If smelter ramps deliver as planned and Chinese material flows freely into LME storage, the stock squeeze could resolve quickly. But for now, any supply disruption or demand surprise in the near term could amplify the already precarious inventory position.
What this means for buyers
Spot zinc procurement remains exposed to downside price risk from the expected surplus, but near-term inventory scarcity means physical premiums could spike on any supply hiccup. Buyers should maintain flexible sourcing strategies and consider locking in prices on dips toward the $3,200/t support level while watching LME stock data as the leading indicator for when the tide turns.