H1 2026 Zinc Calcine Review[SMM Analysis]

SMM 7.13:

In H1 2026, the zinc calcine market was characterized by persistently tight raw material supply, gradually declining supply, and processing fees that rose initially before pulling back.

On the production side, Q1 domestic output fell first then recovered due to the Chinese New Year holiday. Supply recovered noticeably, March-April, as enterprises resumed production. Entering May-June, the circulation of recycled raw materials decreased due to invoice-related issues, combined with rising energy costs such as coal. Enterprise profits remained under pressure, leading to reduced production scheduling and sentiment. June production pulled back to 41,300 mt, tightening market supply again.

On the price side, demand softened early in the year as secondary zinc enterprises halted production over the Chinese New Year holiday, leading to a phased increase in zinc calcine processing fees. As downstream enterprises resumed operations during March-April, procurement by secondary zinc enterprises and some smelters recovered, improving zinc calcine demand and stabilizing processing fees. After May-June, raw material procurement costs increased continuously due to invoice problems, and circulating market cargoes decreased. Meanwhile, domestic zinc concentrate TCs remained persistently low, prompting some smelters to increase zinc calcine purchases. This supported a stronger zinc calcine price, with processing fees edging lower. However, the limited profitability of secondary zinc enterprises and increased production cuts constrained further declines in processing fees, with the overall decline remaining limited.

Looking ahead to H2 2026, the issue of invoices is expected to remain difficult to alleviate in the short term, and a decline in steel mill operating rates will further exacerbate the tight raw material supply. Enterprises producing zinc calcine face persistent cost and profit pressures, with industry production scheduling expected to remain below the levels seen a year earlier.

On the demand side, although the traditional consumption off-season will lead to some weakening in demand from secondary zinc enterprises, domestic zinc concentrate TCs are expected to remain at low levels. Some smelters will still need to purchase zinc calcine to supplement their raw materials, providing some support to the market.

Overall, the tight raw material supply pattern is expected to continue into H2, providing a certain level of support to zinc calcine prices. Processing fees are expected to edge lower slightly, but the room for a significant continued decline is limited by downstream enterprises’ profitability. Processing fees are generally expected to maintain a trajectory of gradual decline and sideways, narrow-range fluctuations.