Zinc spot treatment charges have collapsed to approximately $50 per dry metric tonne, the lowest level since 2020, reflecting the deep deficit in the zinc concentrate market. Chinese smelters, which process roughly 45% of global zinc concentrates, are now accepting TCs below $60/dmt CIF — levels that imply near-zero or negative smelting margins.
The concentrate tightness stems from three major mine supply disruptions. MMG’s Dugald River in Australia cut 2026 guidance by 45,000 tonnes of zinc-in-concentrate after geotechnical issues. Nexa’s Cerro Lindo in Peru saw grades decline, reducing output by 30,000 tonnes. Boliden’s Tara mine in Ireland remains suspended, removing 90,000 tonnes from the Atlantic concentrate market.
Benchmark annual TCs for 2026 were settled at $110/dmt, but spot TCs have deviated sharply below the benchmark as the physical market tightened. This divergence means smelters without long-term concentrate contracts are paying dearly for feed, while integrated operations (Glencore, Teck) that own mines enjoy a margin advantage.
European smelter utilization at 75-80% reflects both concentrate scarcity and elevated power costs. The marginal cost of zinc smelting in Europe is estimated at $2,800-3,100/mt for power alone, leaving thin margins at current LME prices when concentrate costs are factored in.
The ILZSG forecasts the concentrate deficit to persist through 2026, with new mine capacity (Kipushi in DRC, Ozernoye in Russia) not expected to deliver meaningful volumes until late 2026 or early 2027. In the interim, smelters will compete aggressively for available concentrates, keeping TCs under pressure.
The TC collapse is a forward indicator of refined zinc tightness. When smelters can’t secure affordable feed, refined output drops — and that bottleneck shows up in LME stocks and premiums 2-3 months later. Buyers with H2 zinc requirements should assess supply chain exposure. Consider negotiating Q3-Q4 contracts now, before European smelter shutdowns potentially tighten the physical refined market further.