Column: Zinc market continues to defy bear expectations

Zinc failed to perform to script last year and the galvanizing metal continues to surprise in the first days of 2026.

A market that was supposed to transition to oversupply in 2025 was instead rocked by a ferocious squeeze in October and is this week trading at three-year highs on the London Metal Exchange (LME).

Global mine production is growing at a fast clip, but the flow-through to the refined metal segment of the supply chain is taking much longer than expected because all the surplus is stuck in China.

LME zinc stocks have risen from October’s depleted levels thanks to a burst of Chinese exports. But the inventory rebuild has lost momentum in recent weeks, implying the Western market needs more sustained Chinese supply to rebalance.

Mine supply on track

Zinc’s bear narrative is predicated on rising mine production and on that score things are running to plan.

Global mine output jumped by 6.5% year-on-year in the first 10 months of 2025, according to the International Lead and Zinc Study Group (ILZSG).

Boliden’s Tara mine in Ireland has returned to action after closing mid-2023 due to low prices, while Ivanhoe Mines’ Kipushi operation in the Democratic Republic of Congo has been steadily ramping up.

Meanwhile, Russia’s Ozernoye mine has also entered full production after a one-year delay caused by a combination of a November 2023 fire and a lack of spare parts due to Western sanctions over its war in Ukraine.

The impact is clear to see in China’s sharply increased imports of raw materials. Inbound volumes of zinc concentrates surged 30% year-on-year to an annual record of 5.33 million metric tons in 2025.

The turnaround in the zinc concentrates market allowed China to lift output of refined zinc to the tune of 8.4% in the first 10 months of 2025, according to ILZSG’s latest figures.

China trade shifts

Global refined zinc production, however, rose by just 2.9% over the same period because smelter output outside of China fell by 2.2% relative to 2024.

Lower metal production in Brazil and Kazakhstan was compounded by the permanent closure of Toho Zinc’s Annaka operation and the temporary suspension of operations at the Seokpo smelter in South Korea.

That imbalance in smelter performance has left Western markets dependent on Chinese exports to plug the supply-chain gaps.

China’s trade in refined zinc started shifting in the fourth quarter of last year, when the country became a net exporter for the first time since 2022.

Exports jumped to 42,800 tons in November, the highest monthly tally in almost 20 years, as Chinese smelters shipped metal to LME warehouses in Hong Kong, Singapore and Taiwan to profit from a historic spike in the cash premium to over $300 per ton.

But as the LME tightness passed, exports dropped back a gear to 27,000 tons in December.

Partial stocks rebuild

China’s late-year export surge helped LME warehouse stocks recover from under 50,000 tons in October to 131,000 tons at the end of December.

Since then, however, the upward momentum has faded with exchange inventory, both registered and off-warrant, currently sitting at 138,000 tons.

Moreover, the amount of cancelled warrants in the system, denoting metal that is earmarked for physical load-out, has crept steadily higher to 12,100 tons, almost 11% of registered tonnage.

That suggests the Western market is still running short of zinc and needs more Chinese supply to meet demand, even if the latter has been running at subdued levels.

On paper the global zinc market is in a growing supply surplus but with all the surplus metal trapped in China, it will need higher LME prices to entice it out.

Bears were caught out by zinc’s east-west disconnect last year. With LME three-month zinc trading above $3,300 per ton for the first time since January 2023, they may need to be patient before this market conforms to expectations.

(The opinions expressed here are those of the author, Andy Home, a columnist for Reuters.)