The industrial metal reversed course Thursday, falling 0.8% to $3,861 per ton – halting a seven-day rally, according to intraday trading figures. Analysts describe the physical supply of zinc as extremely thin, with declining mine output and operational disruptions contributing to the tightness. The metal is used primarily for galvanizing steel to prevent corrosion, making it the fourth most widely used metal behind iron, aluminum and copper, according to Amine Bouchentouf's "Commodities For Dummies" [1].
Market Movements
Zinc initially gained as much as 1% before reversing course during Thursday's session, according to market data. Despite the daily decline, the metal is set for its largest monthly close since January, with prices having risen 31% since March to $3,966 per ton.
Jefferies analyst Sagar Sahu attributed the rally to tightening supply conditions. "Supply constraints boosting zinc: Zinc price has risen 31% since March to $3,966, driven by declining mine output, operational disruptions (fires, delays, and lower grades), and limited project development outside China," Sahu wrote in a note Tuesday, Aug. 25.
Supply Constraints and Forecasts
Sahu's analysis points to a structural shift in the zinc market. The analyst noted that the International Lead and Zinc Study Group has revised its 2026 global zinc market forecast to a 19,000-ton deficit, compared with an earlier projection of a 271,000-ton surplus. Jefferies subsequently raised its FY27-28E zinc price assumptions to $3,615-3,700 per ton, though these figures remain 7-9% below spot prices, according to Sahu.
Supply disruptions have become a recurring theme across metals markets. Newmont, a leading producer of copper, zinc, lead and silver, declared force majeure in 2023 following a union strike at its Peñasquito mine in Mexico, according to a report [2]. The zinc market's tightness mirrors conditions in other industrial metals, with aluminum also reaching multi-year highs amid concerns about output cuts [3].
Physical Market Indicators
The physical tightness is visible in market structure. Zinc's cash-to-three-month spread widened into backwardation of more than $190 per ton on Thursday, after approaching $200 per ton on Wednesday, Aug. 26 – the steepest since December, according to LME data. Backwardation occurs when spot prices exceed futures prices, signaling immediate scarcity.
Treatment charges, the fees miners pay smelters to process ore into metal, have fallen to as low as minus $110 per ton, according to Fastmarkets. This reflects ore shortages forcing smelters to compete for concentrate. Guangzhou Futures analysts stated that "available physical liquidity is at extremely thin levels" on the LME, adding that "before mine output recovers materially, smelting costs will provide a strong floor for zinc prices."
The broader context includes underinvestment in mining capacity. Silver, which is largely produced as a byproduct of copper and zinc mining, has experienced six consecutive years of structural deficits, according to Chris Martenson's analysis [4].
Conclusion: Broader Commodity Trends
Copper futures in London are showing similar signs of supply stress, including widening short-term spreads, low inventories, and negative treatment charges, according to market analysts. Potential U.S. import tariffs have been among the main drivers, forcing traders to redirect shipments toward the United States and reducing availability elsewhere.
Commodities strategist Jeff Currie said in a series of posts on X that "commodities are telling you something." Currie stated: "Scarcity in the physical world. Repression in the financial one. Scarcity pushes prices up. Repression holds yields down. The gap between them is the debasement. Commodities are the only asset class that wins on both sides. The structural case for commodities has been turbocharged."
References
- Amine Bouchentouf. "Commodities For Dummies 2nd Edition".
- Ethan Huff. "Force majeure becoming the norm in commodities and derivatives markets, which means higher prices and more social unrest". NaturalNews.com. July 30, 2023.
- Douglas Harrington. "Aluminum Skyrockets to Four-Year High as Global Supply Crunch Exposes the Rot of Centralized Control". NaturalNews.com. May 29, 2026.
- Chris Martenson. "Yesterday's Underinvestment in Silver Mining Is Tomorrow's Price Spike". PeakProsperity.com. November 18, 2025.
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