Zinc Climbs to Highest in More Than Four Years on Supply Squeeze

Zinc prices have reached their highest level since June 2022, closing at $4,107 a ton on August 27 and marking a 55% rally from a mid-2025 low of approximately $2,650. This surge is attributed to a structural deficit driven by collapsing Western stockpiles and mine supply cuts. London Metal Exchange (LME) inventories have fallen dramatically, decreasing 64% from 264,000 tons in December 2024 to around 95,000 tons, a level not seen since April 2023. This tightness is primarily concentrated in the West, while Shanghai Futures Exchange inventories are rising, leading to a wide premium of imported zinc over domestic Chinese metal, reaching $720 per ton, the widest since 2022.

The decline in mine supply is a significant factor. Major producers like Glencore and Teck Resources experienced sharp production drops in early 2026 due to aging assets and lower ore grades. HSBC forecasts a 2.1% year-on-year decline in global production for 2026, totaling 12.5 million tons. This scarcity of concentrate has led to historic lows in treatment charges, impacting Western smelters already grappling with high energy costs, with some charges falling as low as negative $110 a ton. However, profitability at the mine level is increasing due to soaring silver and lead credits, which are projected to reduce global zinc all-in sustaining costs by 6.4% in 2026 to 85.17 cents per pound, sometimes even resulting in negative reported zinc costs.

Despite the rally, analysts expect prices to stabilize but remain elevated. A crucial factor for relieving the concentrate market is new supply, with Ivanhoe Mines' Kipushi project in the Democratic Republic of Congo expected to contribute up to 290,000 metric tons in 2026. The LME market has shown signs of a near-term supply squeeze, with spot metal commanding a widening premium over futures, and the LME cash zinc over the three-month contract surged to $132 a ton, the highest since last December. This situation has led to significant equity gains for major zinc producers exposed to LME prices since January 2026.