Zinc climbed to its highest level since June 2022 on the London Metal Exchange (LME), as warehouse stockpiles drained to multi-year lows and mine supply cuts tightened the physical market. Zinc is primarily used to galvanize steel against corrosion, making its price a bellwether for construction, automotive and infrastructure demand.

LME zinc for cash settlement closed at $4,107 a tonne ($1.86 a lb.) on Thursday, the highest in more than four years and up 55% from a trough of about $2,650 in mid-2025.

Stock in LME warehouses has dropped from about 264,000 tonnes in December 2024 to roughly 95,000 tonnes, a 64% drawdown that has left available metal at its lowest level since April 2023, Fastmarkets reported. LME warehouse stocks are a closely watched gauge of readily available supply, and sustained drawdowns often signal that physical buyers are pulling metal out of the exchange network faster than it is being replaced.

China awakens

China, however, is finally beginning to ramp up zinc exports, according to market participants speaking with Fastmarkets this week. The catalyst is tied to the fact that imported zinc was about $720 per tonne more expensive than domestic metal in China this week, the widest disadvantage for imports since 2022. China is both the world's largest zinc producer and consumer, so shifts in its trade flows carry outsized weight for the global balance.

"China has remained a net importer of refined zinc units this year, albeit at significantly weaker levels, as a combination of strong refined zinc output in China and weak domestic demand caused a build-up of inventories in China at the detriment of LME inventories," BMO Capital Markets reported in a note on Friday.

"There are now signs that the arbitrage is strong enough to stimulate exports, with one trader interviewed by Fastmarkets suggesting that refined zinc exports could reach around 20,000 tonnes in August," BMO said. "We expect this to weigh on LME zinc prices, which have climbed to a 4-year high of nearly $3,900 per tonne in recent months."

Market tightness

The simultaneous decline in inventory and rise in price points to physical tightness: the cash settlement price rises while warehouse stock falls, leaving buyers with less metal to draw on.

The tightness is mostly concentrated in Western warehouses. Shanghai Futures Exchange zinc inventory has risen over the same period that LME stock has drained, Reuters reported, underscoring how the surplus and the shortage sit in different parts of the world.

HSBC's Global Commodity Team forecasts a 2.1% year-on-year decline in 2026 to 12.5 million tonnes, due to lower production levels in Latin America.

JP Morgan expects zinc prices to stay elevated through 2026 as global supply tightens and demand rises, Investing.com reported.

Major zinc producers exposed to the LME price include Teck Resources (TSX: TECK; NYSE: TECK) with a 47% increase, Glencore (LSE: GLEN) with a 46% increase, and Nexa Resources (TSX: NEXA) with a 60% increase in shares since January 2026. Beyond the pricing itself, the coming months will show whether Chinese export flows materialize at a scale that rebuilds LME stocks or whether mine supply constraints keep the Western market short.