LME zinc holds near $4,000/t despite sharp inventory build

• LME zinc remains near $4,000/t despite an 18.7% rise in inventories
• MCX zinc gains 3.7% as open interest signals fresh buying

LME zinc prices remained firm during the period, supported by supply concerns and tight nearby availability despite a sharp increase in exchange inventories. LME cash settlement edged up 0.4% to $3,995.5/t on 3 September from $3,980/t on 21 August, after touching $4,115/t on 1 September.

The three-month contract increased 1.2% to $3,868/t. Meanwhile, LME inventories rose by 17,375 t, or 18.7%, to 110,500 t from 93,125 t, with the sharpest increase occurring towards the end of the period.

The inventory build eased immediate concerns over refined zinc availability and reduced pressure on the nearby market. This was reflected in the narrowing cash-to-three-month backwardation to $127.5/t from $156/t. However, the market remained firmly backwardated despite the stock increase, suggesting that additional warehouse metal has not fully resolved underlying supply tightness.

Supply concerns continue to support zinc

Zinc’s rally extended into early September, with the three-month contract approaching $4,000/t amid concerns over weakening global mine output and tightening concentrate availability.

Global zinc mine output declined 2.6% y-o-y in H1CY’26, according to ILZSG estimates. Lower production at major mines and operational disruptions have added pressure to concentrate availability.

Spot treatment charges for imported zinc concentrates have fallen to record-low negative levels, squeezing smelter margins. The impact remains particularly significant outside China, where refined zinc production has weakened compared with stronger output growth in China.

The market therefore continues to reflect contrasting fundamentals. Rising warehouse stocks could moderate immediate supply tightness, while constrained concentrate availability and weak smelter economics continue to support the broader zinc price structure.

MCX rises as open interest signals fresh buying

MCX zinc futures followed international prices higher, with the September contract closing at INR 418,300/t on 4 September, up 3.7% from INR 403,200/t on 24 August.

The contract touched INR 422,050/t on 1 September, while the period low stood at INR 398,500/t.

Open interest increased sharply from 1,733 lots to 2,777 lots, up around 60%. The simultaneous rise in prices and open interest indicates fresh buying and stronger market participation during the rally.

Domestic market remains firm after HZL hike

India’s domestic zinc market remained supported by HZL’s latest benchmark revision and elevated international prices.

HZL increased its SHG zinc ingot benchmark by INR 5,500/t to INR 434,400/t on 31 August. BigMint assessed SHG zinc ingot at INR 428,400/t ex-Delhi, up INR 2,800/t from the previous assessment.

Higher replacement costs continued to support domestic prices, although downstream buying remained need-based at elevated levels. Competitive imported material could also limit further gains if availability improves.

Outlook

LME zinc is expected to remain volatile as persistent supply concerns are balanced against rising exchange inventories.

The sharp inventory build may continue to ease immediate tightness and limit further upside, particularly if inflows into LME warehouses persist. However, weak global mine output, tight concentrate availability and historically low treatment charges remain supportive factors. The continued backwardation also indicates that underlying nearby-market tightness has not been fully resolved.

Support is seen at $3,800-3,850/t, while resistance is expected around $4,050-4,115/t. LME inventory movements, backwardation and concentrate market conditions will remain key indicators for zinc prices.