China has significantly increased its zinc exports amid ongoing tightness in the London Metal Exchange (LME) zinc market, marking a notable shift from its traditional role as a net importer. According to official customs data compiled by the World Bureau of Metal Statistics, Chinese zinc exports reached 40,668 metric tonnes in August, the second-highest monthly volume recorded in nearly two decades.
This surge in shipments has contributed to China emerging as a net exporter of zinc by 4,388 tonnes over the first eight months of 2023, contrasting sharply with previous years. Exports primarily flowed to LME warehouses in Hong Kong, which received 35,000 tonnes since mid-August, followed by Singapore with 21,250 tonnes and Kaohsiung in Taiwan at 16,725 tonnes. These three ports accounted for 80% of China’s zinc shipments during August.
The increase in exports has been fueled by a price arbitrage opportunity created by a pronounced backwardation in the LME zinc market, where the cash price has remained at a significant premium over three-month futures contracts. In late August, the premium exceeded $215 per tonne, encouraging producers to export more zinc. While the premium has since narrowed, cash metal continues to trade around $60 above the three-month delivery price, sustaining export incentives.
The additional supply from China has helped alleviate shortages in the global zinc market. LME-registered inventories in Hong Kong and other locations rose to 126,975 tonnes by early October, the highest level since June 2022. This increase has contributed to a price retreat from an early September four-year high of $4,065 per tonne to about $3,715 per tonne in recent trading.
China’s shift to net exports comes amid broader market dynamics marked by robust domestic zinc production and weaker demand. Sluggish construction activity has reduced consumption of galvanized steel, limiting internal zinc usage. Shanghai’s zinc stockpiles remain elevated at 143,527 tonnes, exceeding inventories held in London.
Meanwhile, Western zinc smelters face mounting competitive pressures. Some facilities, including the Budel plant in the Netherlands, are at risk amid shifting market conditions. China’s growing role as an exporter is increasingly helping to meet shortfalls in other regions, as evidenced by previous deliveries to LME warehouses in late 2022, when disruptions in Western supply chains tightened the market.
As China continues to leverage favorable pricing differentials, the country appears set to maintain or increase its zinc export levels, potentially becoming a net annual exporter for the first time since 2022. This trend underscores ongoing shifts in global zinc trade flows amid evolving supply and demand fundamentals.