LME zinc three-month prices rallied to $3,557/mt on Friday, the highest weekly close since April 2026, driven by escalating concerns over critically low exchange inventories. LME warehouse stocks now stand at just 107,750 tonnes, down 1.58% week-on-week.
The inventory situation has reached a flashpoint: available stocks cover just 4.2 days of global consumption, the lowest ratio in recent memory. Cancelled warrants account for 15% of total inventory, suggesting further physical withdrawals are imminent.
Treatment charges for zinc concentrate have collapsed to near zero, with spot TCs reported at $20/mt or below. Smelters are struggling to source concentrate, and several Chinese smelters have announced maintenance curtailments through July.
On the SHFE side, zinc prices fell 2.42% to 23,840 CNY/mt, reflecting China's domestic surplus. Chinese refined zinc production rose 4.5% year-on-year in May, and domestic inventories remain at healthy levels of 165,000 tonnes.
The LME-SHFE arbitrage has widened to its largest spread in 12 months, with LME prices at a $600/mt premium. This divergence reflects the growing disconnect between a tight Western market and an oversupplied Chinese market.
LME inventory data is the single most important variable for zinc procurement now. Buyers should secure near-term requirements urgently, as a further draw to below 100,000 tonnes could trigger a spike to $4,000/mt. Consider SHFE-linked contracts for China-exposed supply chains.