The zinc market is in the middle of a tug-of-war between supply constraints and uneven demand. The supply side is winning, for now, with LME zinc holding above $3,600/mt. But the demand picture is too mixed to support a breakout above $3,800 without a fresh catalyst.
In China, demand is providing a moderate floor. Galvanized steel output rose 2.7% year-on-year in May, driven by infrastructure spending and solar mounting structure fabrication. The infrastructure segment absorbed an estimated 85,000t of zinc in May, up 5% year-on-year. However, construction steel demand remains soft, with rebar output down 3% year-on-year.
In Europe, auto sector demand is showing tentative signs of recovery. European car registrations rose 4.1% year-on-year in May, supporting galvanized sheet demand from OEMs. European zinc premiums at $250-280/t over LME cash are stable but below the 2025 average of $320/t.
The International Lead and Zinc Study Group (ILZSG) projects a modest supply deficit of 80,000t for 2026, down from 120,000t in 2025. The reduced deficit reflects softer demand assumptions, particularly for construction. The market is finely balanced — a 2% demand swing would flip the balance between deficit and surplus.
The zinc market is balanced enough that tactical buying makes sense. For Q3 requirements, fix at $3,500-3,600/mt — this range has held for most of June and provides a reasonable entry. If Chinese infrastructure spending accelerates in H2, expect prices to test $3,800. If European construction weakens further, $3,300 is the downside floor. Keep coverage within 60-70% of requirements and float the rest.