Silver Now Holds Up Asia's Zinc Giants

A Shortage Has to Land Somewhere

The world is running short of zinc ore. Mine output fell 2.6 per cent in the first half of this year, according to the International Lead and Zinc Study Group (ILZSG, via Reuters), and last year's recovery has gone. The fee that miners pay smelters to turn ore into metal has gone with it. On the spot market for ore shipped into China, smelters now pay the miners.

A shortage travels down its chain until it reaches a link that cannot hand it on. In Europe it has reached smelters such as Nyrstar's Budel plant in the Netherlands, which has been "losing money every year" (Reuters). China has shipped its spare metal abroad, and most of August's shipments went to exchange warehouse hubs rather than factories.

Asia's smelters faced the same ore market and came out of it in four different shapes. Korea Zinc sold more silver than zinc, by value, in the first half of this year. Hindustan Zinc cut the cost of making a tonne of zinc by more than a quarter. In Japan, Mitsui and DOWA plan to make more zinc. Young Poong's Seokpo smelter in Korea has run at about half its capacity.

So with the fee for smelting gone, what now keeps Asia's zinc giants running, why does Japan run differently, and what does it mean for the companies in Japan, South Korea and India that buy their metal?

The Mines Now Set the Terms

The Smelter's Wage Fell Below Zero

A treatment charge is what a miner pays a smelter to turn its ore into metal: the smelter's wage. The annual benchmark was $274 a tonne in 2023 and $165 in 2024 (Reuters). It fell to $80 in 2025, the lowest on record, and settled at $85 this year (the price reporter Fastmarkets). On spot it went further, to a record minus $115 to minus $150 a tonne on 9 October (Fastmarkets).

A negative charge turns the trade inside out. The fee that once paid for furnace, power and labour has gone, and the smelter pays for the right to work. On those terms it can profit from only three things: what it recovers from the ore besides zinc, ore it owns, or a metal price and currency that outrun its costs. That short list sorts Asia's smelters more cleanly than size or nationality does. It explains why two Korean groups buying the same ore can end up on opposite sides of it, and why Japan, with no silver windfall in the record, needs a third answer.

New Ore Comes Slowly

The pool refills one mine at a time. Kipushi, in the Democratic Republic of Congo, produced a record 77,147 tonnes of zinc in concentrate in the third quarter (Ivanhoe Mines), but until mines like it add up, Asia's custom smelters buy ore on the miners' terms. El Niño disruption, which Fastmarkets expects to peak between November and February, would thin the pool further, while a 2027 benchmark set well above this year's would hand smelters back part of their wage.

The Seminar Case on Ore

Natalie Scott-Gray of StoneX opened her zinc case at the LME metals seminar on Monday with the ore: "mine supply has failed to hold on to last year’s recovery because of structural and environmental disruptions, keeping ore scarce". Then: "treatment charges have hit record lows". The mine count and the spot charge bear out both. The evidence supports her on the cause. The open question is who absorbs it, and that is where the companies' own results take the story further.

Silver Pays for the Survivors

Two companies are the giants of this story, and each is most of its country's zinc. Korea Zinc's Onsan smelter, at about 600,000 tonnes a year, holds about three fifths of Korea's zinc smelting capacity (BizWatch; GEB calculation). Hindustan Zinc puts its own share of India's primary zinc market at about 77 per cent (company report). What pays these two goes a long way to deciding their countries' supply.

What pays them is silver. Zinc ore rarely arrives as zinc alone; it carries silver, lead and other metals, and a smelter able to recover them keeps part of their value on top of its fee, because the miner is usually paid for only part of the silver in its ore. With the fee near or below zero, that share has become the smelter's living, and the bargaining increasingly turns on it: Fastmarkets reports an "increased focus on by-product payables", the share of those metals the miner is paid for, and says it has squeezed smelters. A smelter that recovers silver well can survive the fee's collapse. One that recovers little has only the fee, and the fee is gone.

Korea Zinc Sells More Silver Than Zinc

Silver now earns Korea Zinc far more than zinc does. Korea Zinc made a record first-half operating profit of about KRW 1.333 trillion (SBS Biz; Korea Herald). Its silver sales nearly tripled, to KRW 4.108 trillion, while its zinc sales rose by more than a fifth, to KRW 1.563 trillion. By value it now sells more than two and a half times as much silver as zinc (GEB calculation). A smelter selling that much of the other metal in its ore depends less on what miners pay it for the zinc, and the fee's collapse arrived in a record half. Korea Zinc does not report profit by metal, so silver's exact share of that record cannot be measured.

Hindustan Zinc Digs Its Own Ore

Hindustan Zinc made a tonne of zinc for $703 in the July to September quarter, excluding royalty, 29 per cent less than a year earlier (Business Today). Its cost fell while the fee collapsed around it, and the collapse never reached it: as India's only integrated producer of zinc, lead and silver, it mines its own ore, and scarcity arrives as a higher price for its metal. It holds the second defence too. Silver supplied about 45 per cent of its profitability in the quarter, by one summary of its investor presentation (Investywise). Korea Zinc buys silver-bearing ore; Hindustan Zinc owns it.

DOWA Runs on Price and the Yen

Japan's answer is neither Korea's nor India's. Two groups, Mitsui and DOWA, account for the zinc plans Reuters surveys in Japan, and DOWA holds about 45 per cent of their April to September total (Reuters; GEB calculation). Its smelting segment, which also covers copper, precious metals and recycling, earned ¥15.6 billion in operating profit in April to June, against ¥1.9 billion a year earlier (company filing). DOWA credited higher metal prices, the weaker yen, inventory valuation and mine income; worse terms for buying ore cost it about ¥1.0 billion. Mitsui's filing gives no zinc smelting detail, and its results slides were not read. On the only smelting result found, from a group with under half of Japan's planned output, Japan's zinc is carried by price and currency, and both can turn.

The Evidence on Smelter Losses

The seminar case went on to smelters in general: "if you combine weakening byproduct credits, high energy costs linked to the Iran conflict, then smelters are now loss-making." The evidence bears that out at Budel, and at Young Poong for last year, though Young Poong has scraped an operating profit this year. Asia's largest smelters tell a different story: Korea Zinc, Hindustan Zinc and DOWA all earned more. For Korea Zinc and Hindustan Zinc the difference lies in silver; for DOWA it lies in price and the yen. For the smelters that keep their silver, the credits were the strength of the year, not a weakness. The loss-making picture would come nearer to Asia's giants if silver fell or the yen strengthened.

Korea's Spare Capacity Sits at Seokpo

Two Smelters Make Korea's Zinc

Korea's zinc comes from two smelters, and only one of them is full. Korea Zinc's Onsan and Young Poong's Seokpo supply more than 90 per cent of the zinc Korea uses (Starnews), from roughly 600,000 and 400,000 tonnes of capacity (BizWatch). Onsan ran at full capacity in the first half (Korea Herald). Seokpo ran at 57.23 per cent in the first quarter and 51.7 per cent in the second (Digital Daily). Put together, about a fifth of Korea's zinc smelting capacity stood idle in the second quarter, and all of it was at Seokpo (GEB calculation).

A Plant Left With the Fee

Seokpo shows what happens to a smelter with no windfall to lean on. It buys from the same world ore market as Onsan, but the record shows it with neither Korea Zinc's silver windfall nor Hindustan Zinc's ore of its own, which leaves it holding the one income the mines have taken. Young Poong reported a consolidated operating loss of KRW 259.2 billion for 2025 (BizWatch), while Korea Zinc has just had its best half. For a Korean buyer, Seokpo's idle capacity is where any return of the fee would show first. BizWatch puts much of that group loss down to an operating suspension at Seokpo, and no source explains the second-quarter fall.

What Asia's Buyers Actually See

India Buys From Korea and Japan

India's zinc buyers lean on the two smelting nations above. India used close to a million tonnes of zinc in 2025, about 72 per cent of it in galvanising, and makes less than it uses (BigMint). Of the 206,783 tonnes of zinc ingot it imported in the year to March 2025, Korea supplied 102,094 tonnes and Japan 47,804, together about seven tonnes in ten (BigMint; GEB calculation).

This year that metal arrived without a fight. Korean special high grade zinc was offered in India at roughly $220 to $280 a tonne over the LME price in May and June, and BigMint, the Indian price reporter, gave two reasons: "Ample Australian supply caps import premiums" (3 June), and a "lack of buying interest" (6 May). The second matters as much as the first. Either way, India's importers did not have to bid up the premium for metal that comes largely from Korean and Japanese smelters. The range is GEB's calculation from offers BigMint reported, and the only premium it stated was about $270, at the end of June. The full-year import volumes found run only to March 2025.

Korea Exports About as Much as It Uses

Korea's buyers sit beside an export industry. Its two smelters exported about 447,000 tonnes of zinc last year, by the Korean news site inews24's estimate from their export sales, close to the 435,000 tonnes the whole country used in 2024 (Starnews). Demand at home is building on the steel side. POSCO broke ground in September on a line at Gwangyang that will galvanise 450,000 tonnes of car sheet a year from 2028 (Kyungbuk Maeil), and from June to October Korea put provisional anti-dumping duties on Chinese coated steel, sheltering its own coating lines. When POSCO raised its steel prices for the second quarter, it named iron ore, coal, freight, the exchange rate and oil, but not zinc (Hankyung). With that much of its zinc going abroad, Korea has room to feed those lines by keeping more at home. We found no Korean buyer statement on zinc supply, and the trade figures are press estimates, not customs counts.

Japan Still Makes More Than It Uses

Japan's buyers have a cushion too. Even after Toho Zinc stopped smelting zinc at Annaka in March 2025 (Reuters), Japan made 390,000 tonnes of refined zinc last year, 16.3 per cent less than in 2024, against 328,000 tonnes used at home (ILZSG). The surplus goes abroad, some of it to India (BigMint). Mitsui and DOWA plan to make more. Mitsui plans 108,200 tonnes between April and September, up 3.2 per cent, and DOWA 89,373 tonnes, up 10.2 per cent (Reuters, April). Japan's announced smelting halt, Mitsubishi Materials' at Onahama, is in copper (company, May). We found no sign of a Japanese buyer short of zinc, and plans are not outturn.

China's Metal Went to the Warehouses

Most of China's August export zinc went to warehouse hubs, not to Asia's factories. China exported 40,668 tonnes of refined zinc in August, its second-highest month in almost two decades, and Hong Kong, Singapore and Kaohsiung took 80 per cent of it (Reuters, Andy Home). All three ports host exchange warehouses, and Fastmarkets found incremental interest focused on "delivery into the LME warehouse system rather than sales to downstream consumers in Southeast Asia." Over the first eight months its net exports were only 4,388 tonnes. We found no sign that the metal reached Korean, Japanese or Indian buyers in volume, though no source rules it out.

China's Exports and the Exchange

The seminar's figure for China's exports holds up. "I don't think exports from China are going to be enough to solve the backwardation in entirety," the speaker said, and her "40,000 tonnes for just August alone" matches the customs count. The destination adds a further point for Asia's buyers: metal delivered to the exchange is not metal sold to a galvaniser. The 13 per cent export tax cited at the seminar could not be confirmed.

The Shortage Stopped at the Smelter

The ore shortage has done its damage one link above the buyer. The same tonne of ore that no longer pays a smelter for its zinc still pays it for its silver, and that single fact runs through every country in this story. It is there at Onsan, which stayed full while a fifth of Korea's capacity idled at Seokpo. It pays Hindustan Zinc, which owns its silver-bearing ore and cut its costs as the fee vanished. With those furnaces running, India, which buys most of its imported zinc from Korea and Japan, has not had to fight for metal, and Japan, where DOWA earned on price and the yen instead, is the exception that rests on a currency. The protection has a price of its own. Much of Asia's zinc now comes from furnaces paid largely by silver, a metal no zinc contract mentions.

That dependence runs both ways. Asia's supply would tighten if silver weakened or less ore reached those furnaces, and ease if the fee came back to the smelters or China's warehouse metal moved on to the people who use it.

In Japan, South Korea and India the shortage has reached buyers as a price, not as missing metal, because the smelters above them found other income when the fee went.