LME zinc hits $3,434 a tonne as inventories drop by more than half since 2025

By Siam Sukkhee Trading Co., Ltd — 2026-06-27 — zinc ingot supply demand

The price move is clean, sure. But the warehouse numbers are what's actually screaming right now.

On June 26, 2026, the LME three-month zinc contract closed at $3,434.50 per tonne. That's about $226 higher than where we started the year, a solid 12% rally year-to-date. Fine. Except the price is almost beside the point. What you need to look at is inside the exchange's registered warehouses, where monitored inventories have fallen from around 230,500 tonnes in early 2025 to approximately 110,000 tonnes today. More than half, gone in eighteen months.

That's not a technical fluke.

Backwardation is the physical market screaming. When prompt zinc costs more than future metal, it means buyers can't wait and smelters aren't making it fast enough to catch up. I've been following this for a while now, and Fastmarkets and StoneX are both pointing at the same two things: supply disruptions and steady demand that simply isn't letting up. Actually, let me correct that—it's below-trend supply and normal demand. That's the real squeeze.

Start with supply. Japan's Toho Zinc shut down its Annaka smelter, which removes refining capacity that isn't coming back quickly. Smelters in Kazakhstan have been running below what they're capable of for months. These aren't temporary hiccups. Smelter restarts take months. New capacity takes years. Fastmarkets noted that refined zinc production fell roughly 2% last year even though mined output rose more than 6%, meaning the ore was sitting there but the processing capacity wasn't. That gap doesn't close just because the price moves higher.

On the demand side, galvanizers across Southeast Asia and China have kept consumption steady. Construction steel, automotive—the usual. It's not explosive growth. Doesn't need to be. When supply gets tight, flat demand is enough to drain a warehouse down to nothing.

The backwardation is real

The cash-to-three-month spread hit record-wide backwardation for zinc on the LME at certain points this year. That's not noise. That's buyers paying real money to get metal now instead of waiting three months. Which means 110,000 tonnes of inventory isn't just low in absolute terms. It's not showing up in the right places fast enough to cover what people need right now.

You might ask if this is a squeeze—some concentrated position artificially cornering the market. What I'm seeing looks more structural than that. The inventory decline started in early 2025 and has been basically linear. Squeezes are sharp cliffs. This is a slow bleed. The International Lead and Zinc Study Group is forecasting a 271,000-tonne supply surplus for the full year 2026, which as far as I can tell means the tightness we're looking at now is a timing issue, not an end-of-year structural problem. But forecasts don't fill warehouses in June. The market prices what it sees, not what someone projects for December.

Here's the practical read: the year-to-date gain is credible given where inventories actually are. There's no obvious near-term catalyst to push serious volumes back onto the exchange. Smelter output could recover in the second half of the year. Chinese production, which is running at a domestic surplus, might start routing more metal to LME-registered locations. If that happens, the backwardation could ease faster than current cash prices suggest. Until it does, the physical market stays tight.

That's what we're pricing now.

Tags: LME zinc, Toho Zinc, Fastmarkets, LME zinc price June 2026, zinc inventory backwardation 2026, zinc smelter output disruption