Zinc treatment and refining charges — the fees smelters earn for converting concentrate into refined metal — have collapsed to their lowest levels in over seven years. Spot TCs below $50 per dry metric tonne mean smelters are effectively paying miners for concentrate rather than the other way around. The 2026 benchmark TC settlement of roughly $140/dmt, down 45% from $255 in 2025, reflects the most severe annual reduction since the commodity supercycle ended.
The root cause is a structural shortfall in zinc mine production. Global zinc mine output grew just 0.8% year-over-year through May 2026, according to ILZSG data. Depletion at major mines — including Glencore’s Mount Isa complex, Vedanta’s Gamsberg, and several aging Chinese operations — has offset new capacity from Peru and Australia. The pipeline of new zinc mine projects is thin, and most are not expected to reach full production until 2027-2028.
The concentrate deficit is forcing smelter cutbacks. Global zinc smelter utilization fell to roughly 82% in May, down 3 percentage points from Q1. Several smelters in China and Europe have announced maintenance shutdowns for Q3. Korea Zinc, one of the world’s largest zinc smelters, reduced operating rates in June due to concentrate supply constraints.
What makes this deficit different from past cycles is that demand is not booming. Global refined zinc consumption was up only 1.2% year-over-year through May. The deficit is entirely supply-driven — a slow-motion mine depletion story that will take years to resolve. If demand growth accelerates in H2 — for example, from infrastructure spending — the deficit widens further.
The TC collapse is a leading indicator of zinc price strength. When smelters can’t get enough concentrate, refined production eventually falls, and prices rise to ration demand. Buyers should monitor smelter utilization rates — if they drop below 80%, expect zinc to test $3,600-3,800. Q3 and Q4 zinc contracts should be secured sooner rather than later. The concentrate deficit is not going away in 2026, and any demand acceleration will tighten the refined market further.