Zinc Faces Bearish Outlook Amid Rising Supply and Weak Demand
Zinc has emerged as the underperformer among London Metal Exchange (LME) base metals in 2025, weighed down by oversupply concerns and weak demand. The latest benchmark smelter treatment charge between Korea Zinc and Teck Resources reinforces this bearish narrative, with fees dropping to $80 per metric ton—a sharp decline from last year’s $165 per ton and the lowest level in over 50 years. This historic reduction reflects shifting dynamics in the zinc market.
Treatment charges typically rise during periods of raw material oversupply and fall during scarcity. While this year’s super-low benchmark might initially appear bullish, it aligns with recovering mined zinc supply after a year of unexpected shortages. Spot treatment charges, which turned negative in late 2024, have rebounded to $35 per ton, according to Shanghai Metal Market (SMM). The rebound suggests that miners and smelters anticipate stronger supply in 2025.
In 2024, global zinc mine production contracted by 2.8%, marking the third consecutive year of declining output. This was largely due to price-related mine closures in 2023 and disruptions such as the fire at Russia’s Ozernoye mine. The International Lead and Zinc Study Group (ILZSG) had forecast a modest 0.7% increase in production for 2024 but instead reported a significant shortfall. This supply squeeze contributed to a global refined zinc deficit of 62,000 tons last year.
However, mined supply is now recovering. China’s zinc concentrate imports jumped by 33% year-on-year in January and February 2025, driven by new sources such as the Democratic Republic of Congo’s Kipushi mine and ramped-up production at Ozernoye. Improved concentrate availability has encouraged Chinese smelters to increase output, with refined zinc production rising by 4% in March compared to the same month last year. Further growth is expected in April as smelters capitalize on higher feedstock availability.
While supply is recovering, demand remains lackluster. Global refined zinc consumption grew by just 0.1% in 2024, according to ILZSG, and prospects for 2025 remain weak due to sluggish construction activity—a key driver of zinc usage for galvanizing steel. Manufacturing demand is also facing headwinds from trade tensions sparked by U.S. tariffs under President Donald Trump. These factors have pushed LME three-month zinc prices below $2,600 per ton, down 13% since the start of the year.
Despite the bearish outlook, zinc’s price sensitivity could inject volatility into the market. A further price collapse could lead to mine suspensions similar to those seen in 2023, potentially reversing recent supply gains. Last year’s benchmark treatment charge proved unreliable as a guide to market dynamics, and this year’s may face similar challenges as stakeholders navigate shifting supply-chain conditions.
