Zinc prices have climbed to their highest level in more than four years as tightening global supply continues to fuel a months-long rally.
Prices on the London Metal Exchange (LME) rose as much as 2.8% to nearly US$4,000 per tonne ($5,591), the highest since April 2022.
The metal, primarily used to galvanise steel, has now risen for five consecutive months, taking its year-to-date gain to around 30%.
The rally has largely been driven by tightening supply outside China, with available inventories remaining historically low, and disruptions continuing across the mine and smelting sectors.
Inventories remain tight
Physical zinc inventories held in LME warehouses remain below 100,000 tonnes, relatively low by historical standards.
Around 30,000 tonnes of that inventory has also been ordered for withdrawal, according to data cited by Bloomberg, further reducing the amount of metal readily available to buyers.
The tightness is also reflected in smelter treatment charges, which fell further last month to end August at negative US$117.50 per tonne.
Negative treatment charges point to intense competition among smelters for limited zinc concentrate supply.
“There are frequent disturbances on the supply side,” Chinese brokerage Chaos Ternary Futures wrote in a note.
China has started increasing zinc exports, potentially providing some relief to supply constraints in other major markets.
The country is traditionally a net importer of refined zinc but returned to being a net exporter in July, according to data provider Shanghai Metal Market.
However, higher Chinese exports may not be enough to reverse the broader bullish supply dynamics, particularly as disruptions linked to the war in the Middle East continue to affect the market.
Mine supply set to decline
HSBC expects the refined zinc market to remain slightly tight this year, with modest demand recoveries in Europe and North America coinciding with disruptions across mines and smelters.
The bank forecasts global zinc mine supply to decline 2.1% year-on-year to 12.5 million tonnes in 2026.
The International Lead and Zinc Study Group has also highlighted weakness in the supply picture, with global mine production slowing during the first half of 2026.
The combination of constrained mine output, low inventories and disruptions across the supply chain has helped zinc maintain its upward momentum despite increasing exports from China.
Investors bet on further gains
Investment funds are also increasingly positioning for higher zinc prices.
Reuters columnist Andy Home recently wrote that funds have accumulated more than 110,000 tonnes of long positions in zinc, by far the largest collective bet on higher prices since the LME began publishing positioning data in 2018.
The renewed bullish sentiment is also evident in the LME options market. Home highlighted that nearly 1,500 lots of open interest are concentrated in December call options with a strike price of US$4,000 per tonne, with another 757 positioned at US$4,500 per tonne.
Write to Jackson Chen at Mining.com.au
Image: Stavian Metal
