Zinc treatment charges have fallen to $80-100/t, the lowest level since 2023 and down 40% from the $140-160/t range a year ago. The TC compression is the clearest signal that concentrate supply is tightening relative to smelting capacity. Spot market TCs in China have dropped even further, with some transactions reported below $70/t.
The concentrate squeeze has three structural drivers. First, mine closures and ore grade decline: the shutdown of the Tapuli mine in Sweden and reduced output at Australia's McArthur River have removed an estimated 80,000t of zinc-in-concentrate from the supply chain. Second, new smelting capacity in China and India has increased concentrate demand by roughly 3% annually. Third, existing concentrate stockpiles are depleted after two years of deficit markets.
Smelter margins are under pressure. At current TCs and zinc prices, smelters in China earn $180-220/t in processing fees, down from $300-350/t in 2024. Smelters in Europe, where power costs add $50-80/t to operating expenses, are closer to breakeven. No major smelter cuts have been announced yet, but the margin trajectory is unsustainable.
A zinc concentrate deficit of roughly 150,000t is projected for 2026. The deficit will be covered by drawing down concentrate stockpiles, but those stocks are finite. By Q4 2026, concentrate inventories are expected to reach critically low levels, likely forcing smelter curtailments.
The TC trajectory is a leading indicator for zinc supply. If TCs fall below $80/t in China, expect smelter cut announcements within 6-8 weeks. For Q4 delivery, securing zinc at $3,500-3,600/mt provides downside protection against a supply-driven rally. The risk-reward skews bullish for H2 2026. Monitor the monthly ILZSG data for concentrate balance updates.