Highlights

  • LME cash zinc settled at US$3,768/t on 10 Nov, 2.6% below a week earlier, while LME stocks fell 13.6% from 21 Oct to 144,975t.
  • A post-midterm, hawkish-Fed risk-off wave hit crowded zinc positions, and the cash premium over three-month shrank to US$34 from US$118 in late October.
  • Record-low treatment charges and Western smelter stress keep Supply tight, with China the main relief valve; watch LME stocks, the spread and smelter news.

Metal is still leaving LME warehouses and mines remain short of ore, yet zinc has slipped as macro jitters and a cooling spread took the heat out of the squeeze.

What happened

Cash zinc settled at US$3,768 a tonne on the LME on 10 November, up 0.4% on the day but 2.6% below the US$3,869 of a week earlier. It has given back 5.3% from US$3,980 on 29 October, with the sharpest drop on 6 November, when cash fell US$118 in a single session.

Meanwhile, metal keeps leaving LME sheds. Stocks fell to 144,975 tonnes on 10 November, down 1,400 tonnes on the day and 13.6% below the 167,825 tonnes held on 21 October.

The premium for prompt metal has shrunk sharply. Cash traded just US$34 over three-month on 10 November, against a spread of US$118 in late October. Zinc futures rose about 1.5% to around US$3,765 on 11 November.

Why it happened

The 6 November slide came with a broader risk-off wave. Base metals were hit after the US midterm elections triggered a tech-stock selloff, while Fed officials argued for further rate rises. LME copper fell 1.7% in the same overnight session.

Positioning made zinc vulnerable. Speculators held record short bets while other funds were "close to record long positions" in late October. With both camps so heavily committed, a macro shock can move the price further than fundamentals alone would suggest.

The narrower spread also points to less panic over immediate supply. LME stocks had been rebuilt by Chinese exports: China shipped 40,668 tonnes of refined zinc abroad in August, much of it to LME warehouses in Hong Kong, Singapore and Kaohsiung.

But the drawdown since late October shows that metal is being pulled out again. In one week in October, 26,300 tonnes were net-cancelled and queued for load-out. Operational incidents at Korea Zinc, Kazzinc (part of Glencore, LSE:GLEN) and YoungPoong's Seokpo smelter have added to worries, though the hit to refined output "remains unclear".

How it plays out

Mines are the bottleneck. Spot concentrate treatment charges into China hit a record minus US$115-150 a tonne on 9 October. Negative charges mean smelters effectively pay miners for ore, squeezing margins and forcing cuts. Industry forecasts now point to an 88,000-tonne shortfall this year, reversing an earlier surplus forecast.

Western smelters are most exposed. Refined output outside China fell 3.4% year on year in the first half, and Nyrstar is reviewing its 300,000 tpy Budel smelter, which its chief executive says "loses money each year". Miners with spare concentrate win; European galvanisers facing a Rotterdam premium of US$330 a tonne in mid-October lose.

China is the main relief valve. A recovery in Chinese mine output could ease the tightness and cap gains, and Boliden's Odda expansion to 350,000 tpy is due in Q4 2026. El Nino disruption risk is also flagged as peaking between November and February, alongside possible winter smelter cuts in northern China.

Next week, watch LME daily stocks and cancelled warrants, and whether the cash-to-three-month spread widens again from US$34. Fed reaction to the latest US Inflation data will steer the macro mood, while any update on Budel or the disrupted Asian smelters could quickly revive the squeeze.