The price of zinc hit a four year high on the London Metal Exchange (LME) last week as plunging western stockpiles and mine supply cuts squeezed the physical market.
LME zinc for cash settlement closed at US$4,107 per metric ton (MT) on August 27, the highest level since June 2022. The metal has rallied 55 percent from a mid-2025 trough of roughly US$2,650.
The surge tracks a massive inventory drain as stockpiles in LME warehouses collapsed 64 percent from 264,000 MT in December 2024 to roughly 95,000 MT, leaving available metal at levels unseen since April 2023.
The squeeze is acutely concentrated in the west, with Shanghai Futures Exchange inventories rising. This dynamic has pushed the premium of imported zinc over domestic Chinese metal to US$720 per MT, the widest spread since 2022.
The immediate physical deficit, projected at 87,000 MT by late May, stems from raw material shortages.
Major producers like Glencore (LSE:GLEN,OTCPL:GLCNF) and Teck Resources (TSX:TECK.A,TECK.B,NYSE:TECK) posted sharp early 2026 production declines due to aging assets and lower grades.
HSBC (NYSE:HSBC) forecasts that global zinc production will drop 2.1 percent year-on-year in 2026 to 12.5 million MT.
Meanwhile, scarce concentrate has driven treatment charges to historic lows, affecting western smelters that are already struggling with high energy costs.
At the mine level, however, profitability is climbing for an entirely different reason.
In an August 28 report, S&P Global Market Intelligence projects that global zinc all-in sustaining costs (AISC) for primary zinc mines will drop 6.4 percent in 2026 to 85.17 cents per pound.
According to the firm’s data, improved mining efficiency is not driving the decline. Instead, skyrocketing silver and lead credits are offsetting the core costs of extraction.
Zinc deposits are overwhelmingly polymetallic. With silver forecast to average US$73.35 per ounce in 2026 and lead holding near US$2,000 per MT, by-products now dictate mine competitiveness. At current precious metal prices, credits can completely erase mining costs and generate negative reported zinc costs for certain operations.
Major producers exposed to the LME price rally have seen significant equity gains since January 2026.
Notably, the prolonged rally defies early 2026 expectations of a global zinc surplus, as severe concentrate shortages pushed the market into a structural deficit. Looking forward, analysts expect prices to stay elevated, but stabilize.
Meaningful relief for the concentrate market hinges on new supply coming online, led by Ivanhoe Mines’ (TSX:IVN,OTCQX:IVPAF) Kipushi project in the Democratic Republic of Congo.
The asset is expected to deliver up to 290,000 MT in 2026.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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