Zinc Prices Defy Weak Demand as Supply Disruptions Drive LME to Weekly Highs

Zinc futures fluctuated at highs during the final week of May, with SMM reporting that frequent market disruptions are driving both SHFE and LME prices higher despite weak downstream consumption. The disconnect between supply-driven price strength and demand-side weakness has created a market where disruptions dominate trading patterns.

LME zinc inventories remain stubbornly low at around 100,000 tonnes, a level that has historically supported prices regardless of macro conditions. In China, social inventories exceed 260,000 tonnes — nearly 2.6x LME levels — but downstream consumption is mediocre. Galvanizing operating rates are declining, die-cast zinc alloy production is slowing, and zinc oxide producers report lackluster demand.

The supply-side story remains the dominant driver. The Kazzinc smelter blast, Iranian ore shipping disruptions, and the slower-than-expected ramp-up at Russia's Ozernoye mine have all constrained concentrate availability while LME stocks remain low. ILZSG expects Chinese refined output growth of 3.0% in 2026, but smelter margin pressures could curtail those plans.