China transforms into a zinc exporter, changing the global market landscape

Investing.com – Bank of America has noted that after a surge in exports in the fourth quarter, China has become a small net exporter of refined zinc, marking a reversal from its historically stable status as an importer.

This shift occurred after the 2025 London Metal Exchange (LME) forward curve entered deep contango, making exports from China economically viable. Subsequently, LME inventories increased, and the forward curve shifted to a backwardation.

As global zinc mine supply tightens and processing fees decline, Chinese smelters are gaining market share, putting pressure on Western competitors. The country’s operators are now the world’s largest refined zinc producers.

Bank of America forecasts a slight surplus of zinc concentrate and refined zinc globally this year as mine supplies recover. However, the bank expresses concern that increasing reliance outside China on Chinese refining capacity could support prices.

The Middle East conflict is affecting both supply and demand in the zinc market. Iran’s Mehdiabad mine produces 100,000 tons of zinc annually, about 1% of global supply, and exports raw materials to Chinese smelters. A prolonged war could lead to the loss of this capacity, while rising natural gas prices may squeeze smelter margins, especially for operators outside China already under pressure.

Energy price increases and supply chain disruptions caused by the conflict could also impact demand. Bank of America had already anticipated subdued zinc consumption growth before the outbreak of war.

Western smelters are responding to these challenges with three strategies. Some companies, including Korea Zinc and Nyrstar, are diversifying by increasing key mineral production with government support. Toho Zinc has shut down its primary zinc smelting operations to focus on zinc recycling, while Nyrstar has decided to sell its U.S. zinc business to Korea Zinc to concentrate on Australian and European markets. Korea Zinc is expanding its U.S. operations by applying its operational expertise to mines acquired from Nyrstar, while Boliden has achieved vertical integration through the acquisition of mines from Lundin.

Although regions outside China have historically exported both zinc concentrates and refined zinc, oversupply of concentrates still exists. As Chinese smelters continue to expand their market share, the region faces potential shortages of refined zinc.

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