Zinc is the base metal that refuses to follow its own script. The bear narrative for zinc has been consistent for two years: rising mine production would overwhelm demand, treatment charges would recover, refined output would surge, and prices would retreat below $3,000 per tonne. It has not happened. LME three-month zinc closed at $3,541 per tonne on July 3, 2026, according to LME data. Spot prices in early July remain in the mid-$3,000s. LME warehouse stocks, which stood at 230,500 tonnes at the start of 2025, have collapsed to approximately 110,000 tonnes — a level that leaves the exchange system with minimal buffer against any supply disruption.
The International Lead and Zinc Study Group delivered the most important zinc market revision of 2026 on April 23. The ILZSG, which had previously forecast a 271,000-tonne surplus for 2026, now projects a deficit of 19,000 tonnes. The revision was driven by multiple factors. Refined zinc production, which the group now sees rising 2.4% to 14.13 million tonnes, is growing slower than initially expected because concentrate availability — while improved — is not flowing through to refined output at the anticipated pace. Demand, now forecast to increase 1.3% to 14.00 million tonnes, is proving more resilient than the ILZSG's earlier 1.0% growth estimate. The net effect is a swing of nearly 290,000 tonnes from surplus to deficit — a fundamental repricing of the market's supply-demand balance.
The treatment charge market confirms the tightness. Teck Resources and Korea Zinc agreed to a 2026 benchmark treatment charge of $85 per dry metric tonne in March 2026, a $5 increase from 2025's all-time low of $80. But the China Zinc Smelter Purchase Team set its Q2 2026 guidance at just $35-70 per tonne — sharply lower than the $105-120 per tonne guidance for Q1 2026. Spot TCs for some cargoes have turned negative, meaning smelters are paying mines to take concentrate. This is not a market that is awash in ore. 'A very low TC and only a $5 increase from an all-time low — that's a very low settlement from a smelter's point of view,' one source told Fastmarkets in March.
The persistent tightness in the concentrate market has a structural cause. Global zinc mine production did jump 5.4% in 2025, driven by expansions in Australia, China, India, Peru, and the DRC (where the Kipushi mine ramped up). But most of that incremental concentrate stayed in China. Reuters reported in January 2026 that Chinese refined zinc output rose 8.4% in the first ten months of 2025, absorbing the new mine supply domestically rather than exporting it to the West. 'Global mine production is growing at a fast clip, but the flow-through to the refined metal segment of the supply chain is taking much longer than expected because all the surplus is stuck in China,' Reuters analyst Andy Home wrote. The Western market, in other words, is not seeing the benefit of rising global mine output.
JP Morgan crystallized the bullish case on May 29, forecasting LME zinc prices to average $3,400-3,500 per tonne for the remainder of 2026. The bank reduced its 2026 global refined zinc production forecast by nearly 300,000 tonnes, tightening the global balance by a similar amount. The market is now projected to show a surplus of just 130,000 tonnes — a number small enough that any further supply disruption could flip it to deficit. JP Morgan explicitly cited 'supply disruptions despite weak demand' as the driver of elevated prices.
Not everyone agrees. Morgan Stanley calls for a 2026 annual average of $2,900 per tonne on expectations that current strength will fade as surpluses emerge. StoneX sees prices 'pulling back from sub-$3,000 levels' over the course of 2026 as ore supply improves and refined output recovers. Fastmarkets, in its monthly base metals update, projects that zinc oversupply in 2026-27 will produce 'a reality check in the second half of 2026.' The disagreement between JP Morgan ($3,400-3,500) and Morgan Stanley ($2,900) represents a $500-600 per tonne spread in the 2026 average price expectation — roughly 15-20% of the current spot price. This is an unusually wide divergence for a single commodity in a single year.
Demand is the weak link in the bull case. Zinc's primary use — galvanizing steel for corrosion protection — ties it directly to construction and manufacturing. China's property sector remains deeply depressed. The ILZSG projects Chinese refined zinc demand growth of just 0.1% in 2026, essentially flat. European demand is forecast to grow 0.7%. These are not numbers that suggest demand-pull inflation. The tightness is entirely supply-side: mines are producing more ore, but smelters cannot convert it to metal fast enough, and the metal that is produced is not reaching the warehouses where it is needed.
For zinc buyers, the current setup is uncomfortable. The ILZSG says deficit, JP Morgan says elevated prices, and the physical market — judging by treatment charges — says concentrate is scarce. But demand growth is barely positive, and every mine expansion forecast suggests more ore is coming. The risk for buyers who delay procurement is that the tightness persists through Q3 and prices stay in the $3,400-3,500 range. The risk for buyers who lock in now is that the 'reality check' Fastmarkets warns about materializes in H2 and prices fall toward $2,900.
Zinc is a market where the price tells you one thing and the demand data tells you another. The supply story — low TCs, collapsed LME stocks, ILZSG deficit, Western market starved of Chinese exports — supports prices at $3,400-3,500. The demand story — flat Chinese consumption, weak European construction, 1% global growth — argues for eventual mean reversion toward $2,900. For Q3 procurement: the safest posture is to contract on a quarterly index basis rather than locking in a full-year fixed price. If supply tightness persists, you participate in the upside but avoid being caught long at peak prices. If the surplus materializes, your Q4 prices benefit from the decline. For galvanizers and steel mills: the treatment charge environment means smelters are desperate for feed — this is a good time to negotiate more favorable delivery terms and credit arrangements with your zinc suppliers, even if the headline LME price remains elevated. Watch Chinese refined zinc export data monthly. If exports rise above 8,000-10,000 tonnes per month, it signals that the concentrate bottleneck is easing and Western stocks will rebuild — the first sign that the bear case is arriving.