- LME zinc remains above $4,000/t despite a 2.3% decline in inventories
- MCX zinc holds steady as weekly open interest declines
LME zinc prices remained elevated during the week despite a correction from the recent four-year high, supported by persistent concerns over concentrate availability and tight nearby supply. LME cash settlement declined 1.8% to $4,015/t on 11 September from $4,087/t on 4 September, after touching a weekly high of $4,186/t on 9 September.
The three-month contract fell 1.5% to $3,872/t. Meanwhile, LME inventories declined by 2,600 t, or 2.3%, to 109,575 t from 112,175 t. Stocks had briefly risen to 115,675 t on 9 September before falling sharply over the following two sessions.
The inventory drawdown, together with the continued premium for nearby metal, kept the market structure firmly backwardated. The cash-to-three-month backwardation narrowed to $143/t from $157/t over the week but remained elevated, indicating that immediate supply tightness has not been fully resolved.
Supply concerns continue to support zinc
Zinc prices remained supported by tightening concentrate availability and persistent concerns over global mine supply.
Global zinc mine output declined 2.6% y-o-y in H1CY’26, according to ILZSG estimates. Lower output at major mines, including Antamina in Peru and Red Dog in Alaska, along with operational disruptions elsewhere, has tightened concentrate availability. Reuters has also highlighted sharply lower treatment charges as evidence of increasing competition among smelters for limited concentrate supply.
Spot treatment charges have fallen to historically low and negative levels, squeezing smelter margins. The pressure is particularly significant outside China, where refined zinc production has weakened, while Chinese output has remained comparatively stronger.
The latest LME inventory movement reinforces the tightness narrative. Although stocks remain well above the levels seen at the beginning of September, the subsequent drawdown after the mid-week build suggests that additional warehouse inflows have not fully eased physical market pressure. LME market commentary has similarly linked zinc’s price resilience to weak mine output and deeply negative treatment charges.
The market therefore continues to reflect contrasting fundamentals. Rising production in China and potential Chinese exports could provide some relief, while constrained mine supply, low treatment charges and tight Western availability continue to support prices.
MCX zinc holds steady as open interest declines
MCX zinc futures remained broadly stable during the week, with the September contract closing at INR 418,750/t on 11 September, up marginally from INR 418,300/t on 4 September.
The contract touched a weekly high of INR 429,500/t on 9 September, while the period low stood at INR 417,700/t on 7 September.
Open interest declined from 2,635 lots to 2,481 lots, down around 6% over the week. The combination of broadly stable prices and lower open interest suggests that the weekly move was not driven by strong fresh buying. However, on 11 September, prices rose alongside open interest, indicating some fresh buying during the latest session.
Domestic market remains firm after HZL hike
India’s domestic zinc market remained firm amid elevated international prices and a sharp upward revision in HZL’s benchmark.
Hindustan Zinc Ltd (HZL) raised its SHG zinc ingot benchmark by INR 12,300/t to INR 437,400/t on 10 September, reversing the INR 9,300/t cut announced on 7 September. The latest benchmark is also INR 3,000/t above the INR 434,400/t level recorded on 31 August.
BigMint assessed SHG zinc ingot at INR 427,500/t ex-Delhi on 11 September, up INR 3,500/t from the previous assessment.
Higher replacement costs and elevated international zinc prices continue to support domestic levels. However, downstream buying remains largely need-based at elevated prices, while improving availability of imported material could limit further upside.
Outlook
LME zinc is expected to remain volatile as persistent supply concerns are balanced against intermittent inventory inflows and the potential for higher Chinese exports.
The recent correction from the $4,186/t weekly high could limit further upside in the near term, particularly if LME inventories continue to recover. However, the latest stock drawdown, continued backwardation and constrained concentrate availability indicate that underlying nearby-market tightness remains.
Weak global mine output, historically low treatment charges and reduced refined production outside China remain supportive factors. At the same time, elevated prices could weigh on downstream demand and encourage additional Chinese exports.
Support is seen at $3,870-3,900/t, while resistance is expected around $4,100-4,185/t. LME inventory movements, backwardation, Chinese exports and concentrate treatment charges will remain key indicators for zinc prices.
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