Lead vs. Zinc: Divergent Market Trends Amid Supply Shifts

Lead and zinc, often mined together, have seen contrasting market movements recently. Zinc prices soared to a 20-month high of $3,284 per metric ton in October 2024, driven by tight raw material supplies. Meanwhile, lead prices dropped under the weight of rising inventories, creating a record premium of over $1,000 per ton in late 2024.

Zinc's rally stemmed from production cuts and disruptions, including fires at the Century mine in Australia. Global zinc mine output fell for a third consecutive year, while China's refined zinc production dropped nearly 7% year-on-year in 2024. These factors pushed the zinc market into a deficit of 33,000 tons, tightening supply and reducing London Metal Exchange (LME) stocks to 324,000 tons by November.

Conversely, lead inventories surged, with LME stocks growing from 29,000 tons in early 2023 to 305,000 tons by late 2024. This inventory spike, primarily attributed to secondary production, has fueled bearish sentiment, leading to record net short positions among investors. Despite balanced global supply-demand assessments, lead's oversupply remains a significant concern.

However, the outlook for zinc is shifting as mine supply rebounds with new operations and restarts. Improved concentrate availability may increase zinc smelter output, narrowing its premium over lead. Yet, rising zinc mine production also signals more lead supply, potentially exacerbating the latter’s stockpile issues.

With limited demand growth—zinc reliant on the weak construction sector and lead tied to declining automotive battery usage—supply factors will likely dominate price movements in 2025. Both metals face challenges, but zinc's tighter supply and stronger investor sentiment may offer it more resilience.

This market divergence highlights the nuanced dynamics shaping the lead and zinc trade as global supply and demand adjust.