Zinc Hits 3-Month Low

Zinc futures rose to $3,830 per tonne, the highest level in four weeks, supported by declining inventories, high electricity costs and tight near-term supply. Stocks held on the Shanghai Futures Exchange dropped 5% from the previous week to 137,139 tonnes, marking their lowest level since March, while inventories on the London Metal Exchange stood at 133,700 tonnes. Supply pressures have been particularly pronounced in Western markets, where zinc output declined 3.4% year-on-year in the first half of 2026, weighed down by elevated energy prices and limited raw material availability. Uncertainty over the future of Nyrstar’s loss-making Budel smelter in the Netherlands has also raised some concerns over the supply outlook. Meanwhile, China’s refined zinc output fell 1.9% month-on-month and 6.4% year-on-year in September. However, the prospect of a recovery in Chinese mine production and improved concentrate availability could ease supply tightness and cap further price gains.

Zinc futures were above $3,700 per ton, holding onto a rebound from a more than two-month low of $3,664.9 per ton touched on October 16, amid persistent near-term supply tightness. Tight supply is particularly evident in Western markets, where zinc production fell 3.4% year-on-year in the first half of 2026 amid high energy costs and limited raw material availability. Investors are also watching the outcome of Nyrstar’s strategic review of its loss-making Budel smelter in the Netherlands, with potential operational changes posing a threat to supply. Meanwhile, China’s refined zinc production fell 1.9% month-on-month and 6.4% year-on-year in September. Inventories in the Shanghai Futures Exchange declined 1.5% from the previous week, providing further support for prices.

Zinc futures fell below $3,700 per ton in mid-October, their lowest level since early August, weighed down by the prospect of increased Chinese zinc concentrate availability and a stronger US dollar. Chinese mine output is expected to rise month-on-month in October as operations resume at mines previously disrupted by accidents and safety inspections. However, supply concerns persist in Western markets, where zinc production fell by 3.4% year-on-year in the first half of 2026 amid elevated energy costs and limited raw materials. Further production risks hinge on the outcome of Nyrstar’s strategic review of its loss-making Budel smelter in the Netherlands. Meanwhile, rising Chinese exports have helped ease tightness in the LME market, although the benchmark spread remains in backwardation, suggesting that nearby supply conditions remain relatively tight. A robust US dollar has added further pressure by making dollar-denominated commodities more expensive for holders of other currencies.