Critical Zinc Market Update: Mine Supply Tightening Creates Challenges for Smelters Worldwide
According to analysts at BofA Securities, the global zinc market is currently in a deficit due to a sharp decline in mine supply. This trend is impacting zinc production and smelter profitability, especially in China and ex-China regions.
The reduction in mine supply has led to a scarcity of zinc concentrates, resulting in near all-time low treatment charges (TCs). Smelters are facing financial strain as they struggle to maintain profitability in this challenging environment.
Spot market availability for zinc concentrates is tightening, leading to lower TCs and higher costs for smelters. BofA Securities predicts further decreases in TCs under 2025 annual contracts as supply constraints persist.
The financial pressure on smelters may result in shutdowns or production reductions, impacting the global zinc market. This issue is part of a broader trend affecting base metals, with structural supply issues unlikely to be quickly resolved.
The dominance of China in the zinc supply chain adds complexity to the situation, as Chinese smelters have the capacity to absorb a significant portion of the available supply. This leaves Western smelters at a competitive disadvantage.
The growing demand for zinc in sectors like construction and green technologies further complicates the outlook for the global zinc market. Western smelters may face challenges in competing with Chinese counterparts if the current supply constraints persist.