Spot zinc prices have shot above later-dated futures on the London Metal Exchange, signaling a tight market as large buyers scoop up inventories and pile into futures at a time when a string of mine disruptions threatens to throttle supplies.
The key question among analysts and traders is whether zinc smelters — squeezed by rising raw material costs and weak end-use demand — will be forced to cut production. That could constrict spot metal supplies and fuel further price gains. The backwardation signals that buyers in the LME market are increasingly alert to that possibility.
Backwardations can emerge quickly in individual price spreads as large buyers emerge on the LME, and they can dissipate just as rapidly if and when those inventories and futures positions are sold back into the market. But the tightness isn’t limited to near-dated months, with a steep backwardation emerging all the way out to 2027 in recent trading sessions — suggesting that investors, traders and consumers could be bracing for a longer-term squeeze on supply.
The latest knock to mine supply came on Friday, as Sibanye Stillwater Ltd. said that it expects operations at its Century zinc mine in Australia