Chinese zinc smelters are facing their most severe margin squeeze in history. Import zinc concentrate treatment charges have fallen to negative $56.25 per dmt, meaning smelters are effectively paying miners to process their ore. Domestic TCs have dropped to 400 yuan per tonne, while sulphuric acid export controls have eroded a key by-product revenue stream — prices for 98% acid in south China have fallen by around 300 yuan per tonne in May alone.
SMM's latest market review describes a tight ore and loose ingots pattern that has made smelters the most severely squeezed link in the industry chain. LME zinc inventories stand at around 100,000 tonnes, while China's social inventory exceeds 260,000 tonnes — a massive divergence that reflects weak downstream demand despite the concentrate crunch.
Adding to the pressure, Iran war-related shipping disruptions have constrained raw material flows from one of China's key concentrate suppliers. Russia's Ozernoye mine has ramped up more slowly than expected. Glencore's Kazzinc smelter in Kazakhstan suffered a fatal blast on May 5 and is operating at reduced capacity, further tightening refined supply on the LME.