Zinc at $3,592 as Smelter Disruptions Compound; Kazzinc, Nexa, Boliden All Offline or Reduced

Zinc on the London Metal Exchange traded at $3,592 per metric tonne on July 13, down 0.62% from the previous session but less than a percent below four-year highs. The metal is up 31.69% year-on-year and, more tellingly, has held above $3,400 through the June base metals selloff that gutted aluminum and nickel. Zinc's resilience is not a macro story. It is a physical supply story — and it is getting worse by the month.

Three major production sites are simultaneously operating below capacity, an overlap that market veterans describe as the most concentrated smelter disruption event in over a decade. Glencore's Kazzinc smelter in Kazakhstan continues to run at reduced rates following an explosion earlier in 2026. Kazzinc is one of the largest zinc smelters in Central Asia, with annual capacity of roughly 300,000 tonnes. The explosion affected key roasting circuits, and full repairs are not expected before Q1 2027.

Nexa Resources' Cajamarquilla smelter in Peru — South America's largest zinc refinery at roughly 340,000 tonnes per year — is gradually restarting after a fire-related shutdown. The restart is proceeding in phases, with full capacity not expected until late Q3. During the phased restart, output is roughly 60-70% of nameplate capacity. Nexa has been fulfilling contracts from inventory, but those buffers are finite. Boliden's Garpenberg mine in Sweden, one of the world's most efficient underground zinc operations, faces the possibility of prolonged lower output following a seismic event earlier this year that required changes to the mining sequence and reduced ore grades in accessible stopes.

The cumulative production loss from these three events is difficult to pinpoint — none of the companies have released precise tonnage guidance — but market estimates cluster around 200,000-250,000 tonnes of lost refined zinc production in 2026. Against the ILZSG's projected 19,000-tonne deficit, these disruptions transform a small statistical shortfall into a real physical squeeze.

On the concentrate side, treatment charges (TCs) — the fees miners pay smelters to process zinc concentrate — have collapsed to $85 per tonne, the lowest benchmark in history. The previous low was $147/t in 2018, and the norm for the past decade has been $150-220/t. TCs are the zinc market's most honest price signal: when they fall, concentrate is scarce relative to smelter capacity. At $85/t, the signal is unambiguous: there is not enough mined zinc concentrate to feed the world's smelters, even with some of them offline. This is a structural supply-side problem rooted in underinvestment in zinc mining over the past decade, when prices spent years below $2,500/t.

Demand is not spectacular, but it does not need to be. Galvanized steel — zinc's primary end-use at roughly 50% of consumption — benefits from ongoing construction activity in India and Southeast Asia, infrastructure spending in China, and the US reshoring of manufacturing. European demand for galvanized steel has stabilized after two years of decline. The auto sector, which uses zinc die-castings, is growing modestly. The demand growth rate of 1.5-2.0% globally is unremarkable, but in a market where supply is contracting, modest demand growth is enough to sustain a deficit.

JP Morgan expects LME zinc prices to average between $3,400 and $3,500 per metric tonne for the remainder of 2026. The bank's analysts note that the supply disruptions are concentrated in the refined metal segment, which has a faster price-transmission mechanism than mine supply disruptions — refined metal shortages hit the physical market directly, without the buffer of smelter inventories. StoneX sees zinc prices pulling back from the $3,600 level as new mine supply comes online later in 2026, but acknowledges that the timing of smelter restarts is the critical variable. Trading Economics' consensus models point to $3,666 by the end of Q3 and $3,850 on a 12-month horizon.

The bull case for zinc is the simplest in the base metals complex: supply is physically broken, demand is steady, and the repair timeline extends into 2027. The bear case is that refined zinc stocks — while drawing — are not yet at crisis levels. LME stocks at 114,800 tonnes represent about 8 days of global consumption, tight but not extreme. If one of the three disrupted operations returns to full capacity ahead of schedule, the deficit narrative weakens. If all three return, zinc could drop to $3,000-$3,200. But that scenario requires three separate engineering and operational recoveries to align — a low-probability outcome.