Zinc's Two-Speed Market: Chinese Surplus Collides with Ex-China Tightness as New Supply Reshapes Global Trade Flows

The global zinc market is increasingly defined by a structural divergence between China and the rest of the world. China's ore supply has surged — up 45% year-over-year in the first seven months of 2025 — while smelter output reached a 17-month high in August 2025. This has pushed the Chinese domestic market into surplus, with implications for global trade flows and price dynamics.

The ramp-up of the Kunlun smelter, adding 560,000 tonnes per year of refined capacity — nearly equivalent to China's annual net imports of refined zinc — is a game-changer. While StoneX does not expect China to become a net exporter of refined metal, the capacity addition fundamentally alters the regional balance and reduces China's import requirements for the foreseeable future.

Outside China, the supply picture is far tighter. European smelters continue to operate under the shadow of high energy costs. Several European plants have reduced output or shifted to maintenance shutdowns. In Australia and North America, mine closures and operational disruptions have limited concentrate availability, keeping ex-China treatment charges under pressure.

The ILZSG's surplus projection of 85,000 tonnes for 2025 and a larger overhang for 2026 masks this regional disparity. Most of the surplus is concentrated in China, while ex-China markets remain physically tight. This explains why LME prices have remained elevated despite the apparent oversupply — the surplus is not where it is needed.

Demand growth is expected to remain modest at approximately 1% to 13.86 million tonnes in 2026, constrained by weak construction and manufacturing indicators across major economies. However, electrification and infrastructure spending — particularly in grid modernization and data center construction — are providing a demand floor that analysts expect to prevent a sharp price decline.