Zinc Holds Near Four-Year High at $3,614 as Smelter Disruptions Compound Structural Supply Deficit

Zinc is the quiet outperformer of the base metals complex in 2026. While copper and aluminum have grabbed headlines with record highs and dramatic corrections, zinc has steadily marched higher — up 32% year-over-year to $3,614/mt — with remarkably low volatility compared to its peers. The rally is built on a foundation of genuine physical tightness: three separate smelter disruptions across three continents have removed an estimated 80,000–100,000 tonnes of refined production from the market in the first half of 2026, at a time when the International Lead and Zinc Study Group (ILZSG) was already forecasting a 19,000-tonne refined deficit for the full year.

The disruption trifecta is extraordinary in its geographic breadth. In Kazakhstan, Glencore's Kazzinc smelter — one of the world's largest zinc production complexes with annual capacity of approximately 300,000 tonnes — has been operating at reduced rates since a June explosion damaged its roasting circuit. Industry sources estimate output is running at 60–70% of capacity, and full repairs may not be completed until September. That's roughly 15,000–20,000 tonnes of lost production per month.

In Peru, Nexa Resources' Cajamarquilla smelter (340,000 tonnes annual capacity) is gradually restarting after a fire-related shutdown in late May. The restart has been slower than expected — production in June was roughly 40% below capacity — and full restoration is now targeted for late July rather than mid-June. Combined with Kazzinc, these two smelters alone have removed roughly 45,000–55,000 tonnes of zinc from the refined market over the past eight weeks.

In Sweden, Boliden's Garpenberg mine — one of the world's most efficient underground zinc operations — experienced a seismic event in March that has raised the possibility of prolonged lower output. While the mine was not directly damaged, Boliden has implemented more conservative ground support protocols that have reduced daily throughput by 8–12%. Garpenberg produces roughly 160,000 tonnes of zinc in concentrate annually, so even a 10% reduction represents 16,000 tonnes of lost mine supply — concentrate that would normally feed European smelters.

The inventory data confirms the tightening. LME zinc stocks at 115,525 tonnes are down from 265,000 tonnes in February — a 56% decline in five months. More importantly, on-warrant stocks (metal available for delivery) are estimated at roughly 85,000 tonnes, covering less than two days of global consumption. Shanghai Futures Exchange (SHFE) inventories fell 2.2% week-over-week in the latest report, signaling that Chinese buyers are drawing from exchange stocks rather than importing. The Shanghai premium for imported zinc has widened to $110–130/mt over LME, the highest since March, indicating that China's domestic market is tightening faster than the LME.

The demand side is holding up better than most analysts expected. Galvanized steel production — zinc's largest end-use, accounting for roughly 50% of global consumption — has been resilient across all major regions. Chinese galvanized steel output rose 3.2% year-over-year through May, driven by infrastructure spending and solar mounting structures. European galvanizers are running at 78% capacity utilization, unchanged from Q1, despite weak auto production. And US hot-dip galvanizing demand has been supported by bridge and highway construction funded by the Infrastructure Investment and Jobs Act, up an estimated 5% year-over-year.

Analyst views on zinc are unusually bullish for a market that was expected to be in surplus at the start of the year. The ILZSG's revised forecast of a 19,000-tonne deficit in 2026 is a sharp reversal from its October 2025 projection of a 271,000-tonne surplus — a swing of 290,000 tonnes driven almost entirely by unanticipated supply losses. Fastmarkets' July survey showed 68% of respondents expect zinc to trade above $3,500/mt through Q3 2026, with 22% seeing prices above $3,800. Goldman Sachs has raised its 12-month target to $3,900/mt, citing the 'compound effect' of smelter outages and low exchange inventories.

The bear case is thin but worth acknowledging. A resolution to the US-Iran conflict and a stronger dollar could trigger profit-taking in zinc as it has in copper and aluminum. And zinc's high price is incentivizing mine supply — Chinese zinc mine output rose 5.1% year-over-year in H1 2026, and new capacity in Peru (Nexa's Aripuanã ramp-up) and Australia (New Century Resources) is adding to the concentrate market. The concentrate market is actually in modest surplus, with treatment charges (TCs) rising to $180–200/tonne — up from $120 in January — indicating that miners are competing to sell concentrate to smelters. The bottleneck is refining capacity, not mine supply. If smelters can resolve their operational issues and return to full capacity, the refined market could flip back to surplus within 8–12 weeks.