LME zinc settled at $3,460/mt on June 28, a 0.82% daily gain that keeps the metal anchored in the $3,400-$3,500 range it has occupied for much of June. SHFE zinc rose 1.06% to ¥24,380/mt. Zinc is the quiet base metal in mid-2026 — no record highs like copper, no violent corrections like aluminum — but the calm surface conceals a concentrate market under extreme stress. Zinc treatment charges have collapsed to near-zero levels on the spot market, and Western smelters are warning that production cuts are imminent if the economics do not improve.
Zinc treatment charges (TCs) are the fee smelters earn for converting concentrate into refined metal. When the concentrate market is well-supplied, TCs rise; when it is tight, TCs fall. In 2025, spot TCs for zinc concentrate fell to $20-40 per dry metric ton — down from approximately $280/dmt in early 2024 and far below the levels at which most smelters can cover their operating costs. The benchmark annual TC for 2026, settled between major miners and Chinese smelters, came in at approximately $80/dmt — a ten-year low and less than one-third of the 2024 benchmark. The collapse reflects a structural shift: global zinc mine production grew by only 1.8% in 2025, well below the 3-4% growth rate needed to feed expanding Chinese smelting capacity.
The supply story begins with mine closures and delays. The closure of the Century mine in Australia (2024), production cuts at Glencore's McArthur River and Mount Isa operations, and delays at several Peruvian and Bolivian projects have reduced global zinc mine output by an estimated 250,000-300,000 tonnes of contained zinc since 2023. New capacity — notably the Aripuanã mine in Brazil and the Neves-Corvo expansion in Portugal — has been slow to ramp up. The net result is a concentrate market that has swung from surplus to deficit over the past 18 months, and the pipeline of new projects is thin. The International Lead and Zinc Study Group (ILZSG) estimates that global zinc mine capacity will grow by only 1.2% in 2026, barely half the rate of smelting capacity growth.
The smelter squeeze is most acute in Europe. Nyrstar's Budel smelter in the Netherlands (315,000 tpy capacity) has been operating at reduced rates since late 2024, and the company warned in June 2026 that further curtailments are possible if TCs remain at current levels. Glencore's Portovesme smelter in Italy remains on care and maintenance. European zinc smelters face a triple squeeze: low TCs, high power costs (electricity accounts for approximately 40% of zinc smelting costs via the energy-intensive electrolysis process), and a weak European demand environment. The economics are stark: at $20-40/dmt TCs and European power prices of €80-120/MWh, most European zinc smelters are cash-negative. The only reason they continue to operate is contractual obligations and the hope that TCs recover.
Chinese smelters are in a better position but are not immune. China's zinc smelting capacity has grown to approximately 7.5 million tonnes per year, but the country's domestic mine production covers only about 60% of its concentrate requirements. The gap is filled by imports, primarily from Peru, Australia, and Bolivia — all of which have seen production challenges. Chinese smelters benefit from lower power costs, sulfuric acid by-product revenue (zinc smelting produces approximately 1.7 tonnes of sulfuric acid per tonne of zinc), and government support. But even Chinese smelters are feeling the margin squeeze, and the China Nonferrous Metals Industry Association has called for 'orderly production discipline' — a euphemism for coordinated output cuts.
Demand for zinc is fundamentally tied to galvanized steel, which accounts for approximately 60% of global zinc consumption. The galvanized steel market in China is projected to grow at a compound annual rate of 7.4% from 2025 to 2030, reaching $34.4 billion in revenue, driven by infrastructure investment, automotive production, and the gradual adoption of galvanized rebar in construction. The International Zinc Association's executive director noted during LME Week that galvanized steel use in automobiles is approximately 90-95% globally, but only 23% in India and 60% in China — implying significant growth runway as vehicle quality standards rise in developing markets. Galvanized rebar, in particular, represents a 'huge opportunity' to improve construction durability and reduce lifetime costs, and adoption is accelerating in India and Southeast Asia.
The ILZSG's latest assessment forecasts a refined zinc deficit of 129,000 tonnes in 2026. This is a meaningful deficit for a market that totals approximately 14 million tonnes per year globally, and it implies a further drawdown of already-low exchange inventories. LME zinc stocks, at approximately 156,000 tonnes, are well below the 2024 peak of 400,000 tonnes and represent less than four days of global consumption. Any additional smelter curtailment would accelerate the inventory draw and tighten the physical market further.
Analyst views on zinc are cautiously bullish. Fastmarkets' base case is for LME zinc to average $3,400-$3,500/mt for the remainder of 2026, with the deficit providing price support but macro headwinds capping the upside. JP Morgan sees zinc in a similar range, noting that Chinese galvanized demand provides a floor but that weak European construction limits upside momentum. The bull case — a major European smelter closure — could push zinc to $3,800-$4,000/mt. The bear case — a Chinese demand shock from construction weakness — would test the $3,000/mt support level. Both scenarios are plausible, which makes zinc one of the more binary base metal trades heading into H2 2026.
For the week ahead, zinc traders are watching LME inventory data closely. Four consecutive weekly draws have brought stocks to levels that could trigger backwardation in the cash-to-3-month spread if the trend continues. Chinese PMI data on July 1 will provide a read on galvanized steel demand through the construction and manufacturing channels. And any announcement from European smelters on production rates will be market-moving. Zinc is a market where supply response is imminent — the only question is whether it comes via voluntary curtailment or involuntary closure.
Zinc buyers need to recognize that the concentrate squeeze is not a short-term event. Global zinc mine capacity is growing at 1.2%, while smelting capacity is growing at 2.5%. That math does not resolve without either higher TCs (which requires new mine supply that does not exist) or smelter closures. The most likely outcome is closures — probably in Europe first, where power costs are highest and TCs alone cannot cover operating expenses. Procurement strategy should reflect this risk. First, secure Q3 and Q4 contract volumes now, particularly if your supplier base includes European smelters. A Nyrstar or Glencore curtailment announcement would tighten the European physical market overnight, pushing regional premiums higher. Second, evaluate the premia you are paying. European zinc premiums have already widened versus Asia, and the spread could widen further if European smelting capacity contracts. If your supply chain allows, sourcing from Asian or Latin American smelters — where power costs are lower and curtailment risk is lower — could provide both cost savings and supply security. Third, consider building a 4-6 week buffer stock of zinc. LME inventories at 156,000 tonnes are dangerously low for a market that consumes approximately 37,000 tonnes per day. A supply disruption — mine or smelter — would draw those stocks to critical levels within weeks.