Zinc prices are expected to strengthen today, supported by a backdrop of low treatment charges, resilient demand from ultra-high voltage (UHV) and computing infrastructure projects, and supportive market conditions.
Token Cat Ltd (ASX: TC) analysis indicates that overnight, LME zinc continued its upward trajectory, closing 0.87% higher. This was buoyed by a positive close for U.S. stock markets and a continued drawdown in LME zinc inventories. The global zinc concentrate market remains tight, with low treatment charges (TCs) squeezing smelter margins. However, demand from UHV power transmission and data center infrastructure is providing underlying support.
Zinc Futures Market Overview
Overnight, LME zinc prices moved higher. The contract opened at $3,545 per tonne, reached a high of $3,594, a low of $3,535, and settled at $3,579, a gain of $31 or 0.87%. Trading volume increased by 3,267 lots to 13,260, while open interest decreased by 1,568 lots to 269,004. On the Shanghai Futures Exchange, the most-active zinc contract also showed strength, with the August 2026 contract settling at 24,670 yuan per tonne, up 205 yuan or 0.84%.
Today's Spot Zinc Price Forecast
On the macro front, U.S. equities closed higher on Monday, with the S&P 500 gaining 0.72% and the Nasdaq Composite rising 1.12%, led by chip stocks. A weaker-than-expected U.S. non-farm payrolls report for June, showing only 57,000 new jobs added versus an expected 113,000, coupled with downward revisions for April and May, has tempered market expectations for further interest rate hikes. Comments from ECB officials acknowledging reduced inflation risks also contributed to a more dovish sentiment, helping zinc prices recover some of last week's losses. Market focus this week is on the upcoming FOMC meeting minutes. The U.S. dollar remains resilient, limiting the euro's rebound, while the yen is subject to intervention expectations.
Domestically, China's logistics industry activity index for June came in at 50.6%, up 0.3 percentage points from the previous month. Sub-indices for business volume and new orders also remained in expansion territory, with logistics demand from sectors like electronic machinery, communication equipment, transportation equipment, and energy-saving appliances showing improvement.
On the supply side, the fundamental tightness in zinc concentrate persists, though signals of marginal easing are emerging. The International Lead and Zinc Study Group (ILZSG) revised its 2026 global zinc market balance from a surplus to a deficit of 19,000 tonnes. Major producers like Glencore's Kazzinc and Nexa's Peruvian smelters, with a combined capacity of around 600,000 tonnes per year, are affected by tight ore supply. In China, 16 smelters have agreed to cut zinc concentrate consumption by 600,000 to 1 million tonnes. Refined zinc output is expected to drop by approximately 13,000 tonnes in July. Both imported and domestic treatment charges (TCs) remain deeply negative, expanding losses for smelters purchasing external ore. Refined zinc production in June was around 570,000 tonnes, a noticeable sequential decline, with further decreases anticipated in July due to cost pressures and unplanned maintenance.
However, potential supply-side increments cannot be ignored. The easing of diesel supply constraints in the Hormuz Strait is alleviating production and shipping bottlenecks for zinc mines. The Kipushi mine in the Democratic Republic of Congo produced 25,677 tonnes in May, potentially nearing the upper end of its annual guidance of 290,000 tonnes. The Romina zinc concentrate project in Peru is in trial production ramp-up, while the Gamsberg Phase II project in South Africa has begun trial feed. The Aljustrel mine in Portugal is ramping up towards 90% of its designed capacity. Domestically, China's Zhugongtang project in Guizhou is expected to begin trial operations by the end of September. Policy-wise, China's 15th Five-Year Plan is expected to phase out outdated capacity and promote the large-scale application of recycled zinc. Urban renewal and underground pipeline renovation projects will directly drive demand for galvanized anti-corrosion materials.
On the demand side, zinc consumption is diversified across sectors. Construction demand, tied to the property sector's later cycle, is constrained by declining new construction starts. Infrastructure demand is supported by special bond issuance but capped by local fiscal constraints, with funding shifting towards new infrastructure. Automobile demand is seeing support from new energy vehicles and exports, while home appliance production schedules are declining. Demand from photovoltaic, wind power, and 5G tower sectors is mixed. The resilience in demand is primarily underpinned by UHV power grid and computing infrastructure projects. Galvanized sheet exports in May rose 8.36% year-on-year, helping to offset some inventory accumulation pressure. Operating rates for die-casting and zinc oxide producers have seen a slight uptick, but downstream finished product inventories are also accumulating, leading to cautious procurement.
Regarding inventories, LME zinc stocks have declined to 118,400 tonnes. Social inventories of zinc in Shanghai warehouses, as of July 3, fell for the third consecutive week, dropping by 3,451 tonnes to 151,276 tonnes. However, absolute inventory levels remain at their highest in over four years, which caps the upside potential for prices.
Overall Market Perspective
In summary, gains in U.S. equities and a drawdown in LME inventories supported overnight strength in zinc. While the tight concentrate market persists, marginal easing is expected in the second half of the year as new projects ramp up. Smelting capacity continues to be released, pointing to clear increments in refined zinc supply. Domestically, a lack of effective demand support from the property and traditional infrastructure sectors, coupled with accumulating zinc ingot inventories, sustains a supply-strong, demand-weak pattern. Overseas, smelting capacity has room to restart as energy prices moderate. Nevertheless, the combination of low treatment charges and resilient demand from UHV and computing infrastructure is expected to support zinc prices, leading to a likely firm performance in the spot market today.
The expected trading range for spot zinc today is between 24,500 and 24,900 yuan per tonne.