Why Zinc Prices Surged 13% in 2024: A Supply Crunch Story

Zinc delivered solid returns in 2024, climbing from US$2,621 per metric ton (MT) at the start of the year to US$2,979 by December 31 — a 13 percent gain that made it one of the strongest performers among base metals. But behind those headline numbers lies a more complex market narrative driven by supply constraints rather than demand fundamentals.

The Concentrate Shortage That Changed Everything

The real story of zinc prices in 2024 centers on one thing: a severe shortage of zinc concentrate feeding Chinese refiners. Since these facilities account for over 50% of global refined zinc production, any disruption upstream has outsized consequences.

This shortage forced smelting operations into a bidding war for limited raw material. The desperation was evident in the treatment charges — fees that refiners pay to processors. By early April, Canada’s Teck Resources struck a deal with Korea Zinc to pay just US$165 per MT, representing a 40 percent discount versus 2023 and the lowest rate since 2021. Some processors even dropped their charges below US$0 per MT in attempts to secure contracts. Eventually, 14 major smelters agreed to curtailment measures that would reduce their 2024 concentrate demand by nearly 1 million MT.

Price Volatility: The H1 Rally That Couldn’t Hold

The first half of 2024 saw zinc prices initially buoyed by “risk-on” sentiment. Bullish talk around copper demand from the energy transition and AI data centers lifted the entire London Metal Exchange (LME) metals basket in April and May. Zinc reached US$3,139.50 on May 21 — its H1 peak.

But this rally lacked fundamental staying power. Investor hopes that the US Federal Reserve would cut rates in early summer proved premature, with the cuts delayed until September. Meanwhile, China’s construction sector — which consumes over 50% of refined zinc for galvanized steel production — continued deteriorating. New home sales in July fell 19.7 percent year-over-year, undermining bullish narratives. By mid-Q2, the rally had exhausted itself.

The Second Half: Warehouse Warfare and Extreme Volatility

H2 opened with zinc at US$2,928.50, and the metal subsequently entered a period of sharp swings. It bottomed at US$2,581.50 on August 7, then staged a recovery to US$3,198 on October 2 — the year’s high. This volatility reflected two competing forces:

The bullish catalyst: Large institutional purchases of refined zinc from LME warehouses. A series of these transactions removed over 106,775 MT from the LME network by year-end, leaving just 154,125 MT available — the lowest level since November 2023. Industry observers suggested Trafigura, a major zinc trader and refiner, was behind at least some purchases, though the company declined to comment.

The bearish headwind: Despite refiners’ output cuts, the global refined zinc market remained oversupplied by 228,000 MT during H1. Much of this material migrated to LME warehouses, keeping prices under pressure even as physical tightness manifested in other ways.

The Demand Problem That Won’t Go Away

Here’s the uncomfortable truth: zinc prices rose despite weak demand, not because of strong demand. The construction sector in both China and Europe — which accounts for the majority of galvanized steel consumption — remains depressed. China’s real estate crisis persists despite government stimulus attempts, while Europe contends with persistent high inflation and elevated interest rates post-pandemic.

This structural weakness suggests any year-end rally in zinc prices was largely a technical/market mechanics story rather than a fundamentals-driven bull case. The big purchases from LME warehouses created artificial tightness that supported prices, but underlying demand indicators remained soft.

What This Means for 2025

Expectations for 2025 hinge on construction sector recovery, particularly in China. If housing stabilizes and European economic conditions improve, refined zinc demand could finally catch up to current price levels. However, as of year-end, the market was still rangebound above US$3,000, with December 31 closing at US$2,978.50 — suggesting traders remain uncertain about the fundamental outlook.

The zinc market in 2024 was less about economic growth and more about supply-side disruption creating artificial floor prices. Watch the Chinese construction data and LME warehouse levels closely heading into 2025 — these two factors will likely determine whether zinc prices can hold their current levels or face pressure from renewed oversupply.