Zinc Rebounds on Tight Concentrate as Nexa Jumps Almost Seven Percent

Zinc prices rebounded on Thursday after two losing sessions, settling at US$3,888.70 a tonne, up 2.04%. The market reaction was far larger than the metal's movement. Nexa Resources rose 6.95% to US$12.92 and Buenaventura climbed 4.96% to US$34.71. Nexa had fallen 4.28% the day before, making Thursday a simple recovery, but the move marked a repricing of the concentrate story. The day also saw strong performance from mining equities overall, with copper, iron ore, and precious metals names rising alongside zinc.

Negative treatment charges, paid to smelters for processing concentrate, have become a clear signal of tight mine supply. When these charges turn negative, smelters are essentially bidding for ore. London inventories are low, and physical availability outside China is particularly tight, supporting the price independently of demand.

Peru, Mexico, and Bolivia are the world's top zinc-producing countries, making the region particularly exposed to a concentrate squeeze. Nexa Resources, a listed company mining in both Peru and Brazil with its own smelters, is the clearest example of this. Its integrated model captures both the mining and smelting margins, leading to a nearly 7% gain.

Buenaventura, a diversified metal producer, benefits less from this tight concentrate supply, resulting in a smaller gain of 4.96%. The concentrate shortage is a supply story, and resolving it will take years as new mines take five to ten years from discovery to production. While demand remains uncertain, particularly driven by construction in China, the tightest point lies upstream in the ore that never reaches a warehouse.