Zinc Market Resilience in a Deregulated Era: Navigating Supply Constraints and Decarbonization-Driven Demand

The global zinc market in 2025 is at a crossroads, shaped by a confluence of supply-side pressures and decarbonization-driven demand. As geopolitical tensions, environmental regulations, and shifting trade dynamics redefine the industry, investors must navigate a landscape where resilience is both a challenge and an opportunity. This analysis explores how zinc's supply constraints intersect with the surge in demand from renewable energy sectors, offering insights into the metal's evolving role in a deregulated era.

Supply Constraints: A Fragile Foundation

Zinc production is under significant strain, with global refined output projected to decline by 0.7% in 2025 compared to 2024's 13.8 million tonnesEmerging Trends in Zinc for 2025^[1]. Key producers like China, Peru, and Canada are scaling back operations due to fluctuating market conditions and logistical bottlenecks. For instance, Chinese smelters have reduced concentrate demand and delayed capacity expansions to manage volatilityEmerging Trends in Zinc for 2025^[1]. Meanwhile, mine closures in Australia and Peru have cut global supply by 80,000 tonnes in Q2 2025 aloneGlobal Galvanized Steel Market 2025^[2].

The U.S., once a zinc processing powerhouse, now imports 73% of its refined zinc, with Canada and Mexico as primary suppliersRebuilding U.S. Zinc Capacity in an Era of Global Competition^[3]. However, Trump-era tariffs on Canadian imports and ongoing U.S.-Canada trade negotiations threaten to disrupt this critical supply corridorMonthly Overview Report: May 2025 - Metalmetre Blog^[4]. Additionally, aging infrastructure and limited domestic exploration have left the U.S. with insufficient refining capacity, exacerbating its reliance on foreign importsVolatility hits critical Zinc supply - The Oregon Group^[5].

Environmental regulations further complicate the supply picture. The EU's Carbon Border Adjustment Mechanism (CBAM), set to include zinc by 2026, will increase production costs for high-emission producers, particularly in India and South AfricaZinc Ore Market^[6]. While this policy aims to curb carbon leakage, it may also slow output from cost-competitive regions, creating short-term supply imbalances.

Decarbonization-Driven Demand: A New Growth Engine

While supply constraints persist, decarbonization policies are fueling a surge in zinc demand, particularly in renewable energy sectors. Zinc's role in corrosion protection for solar panels, wind turbines, and energy storage systems positions it as a critical enabler of the green transition.

Solar Energy: Solar photovoltaic (PV) installations are the largest driver of zinc demand in renewables. A 100MW solar park requires approximately 240 tonnes of zinc for galvanized steel mounting structuresRenewable Energy | ZINC. International Zinc Association^[7]. Global solar PV capacity is projected to grow at a compound annual growth rate (CAGR) of 8.3% from 2020 to 2050, with zinc demand rising from 85,000 tonnes in 2020 to 160,000 tonnes by 2030Zinc demand to benefit from growth in renewables^[8].

Offshore Wind: Offshore wind installations are even more zinc-intensive, with a 10MW turbine requiring 4 tonnes of zinc for corrosion-resistant coatingsLead and zinc making renewable energy possible – Lead matters^[9]. The sector is expected to grow at a CAGR of 14.6% from 2025 to 2034, driven by Europe's aggressive renewable targetsOffshore Wind Energy Market Size, Global Report 2025-2034^[10]. By 2050, offshore wind could account for 90,000 tonnes of annual zinc demandZinc Market Size, Share, Trends & Growth Research^[11].

Energy Storage: Zinc-based batteries, including zinc-air and zinc-ion variants, are emerging as viable alternatives to lithium-ion systems. These technologies require 2 tonnes of zinc per 1 MWh of storage capacityMineral requirements for clean energy transitions – IEA^[12]. If zinc batteries capture 5% of the global energy storage market by 2030, they could add 45,000 tonnes of annual zinc demandStrategic Trends in Zinc Based Batteries Market 2025-2033^[13].

Collectively, these sectors could drive zinc demand in renewables to 360,000 tonnes per year by 2030, up from 110,000 tonnes in 2020Zinc and lead in 2025: Global trends, China’s role, and price outlook^[14]. This growth is underpinned by decarbonization policies like the EU's CBAM, which incentivize cleaner production and renewable infrastructureThe development, changes and responses of the European Union^[15].

Market Dynamics and Investment Implications

The interplay between supply constraints and decarbonization-driven demand creates a volatile yet potentially lucrative market. While a global zinc surplus is projected for 2025, regional demand—particularly in China—will remain a key determinant of price trendsZinc Market Fundamentals: Supply Pressures and Demand^[16]. The weakening U.S. dollar has also introduced complexity, as dollar-denominated zinc prices become more accessible to global buyersMonthly Overview Report: May 2025 - Metalmetre Blog^[17].

For investors, the path forward hinges on three factors:
1. Smelter Adaptation: Producers must balance production cuts with investments in cleaner technologies to comply with CBAM and other regulationsEnd-to-end supply chain resilience management using^[18].
2. New Mine Development: Projects like South32's Hermosa mine in Arizona could bolster U.S. supply, but long lead times and exploration challenges remainRebuilding U.S. Zinc Capacity in an Era of Global Competition^[19].
3. Policy Stability: Trade tensions and tariffs, such as the U.S. 25% tariff on Canadian zinc, could disrupt supply chains and exacerbate price volatilityMonthly Overview Report: May 2025 - Metalmetre Blog^[20].

Conclusion

The zinc market's resilience in a deregulated era will depend on its ability to adapt to supply-side challenges while capitalizing on decarbonization-driven demand. As renewable energy adoption accelerates, zinc's role in corrosion protection and energy storage will become increasingly indispensable. Investors who align with this transition—by supporting sustainable production, diversifying supply chains, and targeting high-growth renewable sectors—may find themselves well-positioned for long-term gains.