Zinc at $3,572: The Rally Nobody Believes In

By Siam Sukkhee Trading Co., Ltd — 2026-07-09 — zinc ingot supply demand

I watched zinc rally early in July. Then watched people immediately sell it on Tuesday.

That tells you something.

LME three-month closed at $3,572 per tonne on July 8, down 0.53% as traders locked in whatever gains they'd made from the earlier move up. It's a small slip. Not dramatic. But the thing behind it is worth thinking about. Morgan Stanley has forecast a 2026 average of $2,900 per tonne. That's $672 below where we closed. You don't see that sort of gap on accident.

The bank's logic is more or less straightforward: China is shipping more refined zinc, warehouse inventories are coming back, and mine supply isn't slowing down. If I'm holding long positions right now, I'm betting against Morgan Stanley's view that we spend most of the rest of the year grinding downward. That's a bet. I'm not saying it's a bad one. I'm saying it's a bet.

But the supply side is where this gets serious.

The ILZSG is projecting mine output will climb 2.4% in 2026 to 12.8 million metric tons. That's an increase. Not enormous, but real. It's coming from everywhere at once—Europe, Australia, Brazil, the Democratic Republic of Congo, China. Actually, that's not quite right. Congo is producing more, yes, but it's not the story-changer people sometimes treat it as. What matters is the spread. You can't dismiss it as a single region's temporary bump. These are coordinated expansions across multiple jurisdictions.

Demand, meanwhile, is growing at 1% to reach 13.86 million metric tons. So mine output climbs 2.4%, demand creeps up 1%. The ILZSG's number for the resulting surplus is 271,000 metric tons annually.

That's not a rounding error.

China is the question everyone asks about. Morgan Stanley reckons Chinese zinc demand will sit flat in 2026. The real estate sector isn't recovering until 2027 at the earliest, and galvanized steel—which accounts for something like half of all zinc use—depends entirely on building activity. No construction boom means no demand signal running down the chain from ingot to finished product. The country that consumed the most zinc isn't going to pull us out of this one. Not next year.

Europe might be slightly better. The ILZSG expects European demand to pick up after 2025's projected 0.7% increase. Some recovery in industrial output could, theoretically, absorb part of the surplus. But Europe's not large enough to offset flat Chinese demand and accelerating global mine supply at the same time. The arithmetic doesn't work.

That July rally, the one traders were exiting on Tuesday, was always fragile.

Short-covering and thin volumes can push prices anywhere without meaning anything. The underlying picture hasn't changed. LME inventories are building. Chinese zinc is flowing out. Mine production is accelerating. These aren't the conditions where a sustained move above $3,600 makes sense. They're not.

You'd need something to break on the supply side. A major mine closure. Bad weather in Peru or Australia or wherever. An unexpected surge in Chinese domestic use that somehow magics away the real estate problem. I don't see any of that forming on the horizon. Until it does, Morgan Stanley's $2,900 doesn't feel like a pessimistic outlier anymore.

Feels like the direction we're actually heading.

Tags: LME Zinc, Morgan Stanley, ILZSG, zinc price forecast 2026, zinc ingot oversupply outlook, LME zinc July 2026 price drop