Zinc's Year To Remember: A Supply-Side Storysee: https://seekingalpha.com/article/4006332-zincs-year-remember-supply-side-story
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Supply/Demand Fundamentals are Supportive
Most metals suffered during what was a protracted commodities downturn (2008-2015), the worst seen in 40 years. But we believe the turnaround began in this year's first quarter (read more on the commodities rebound), and zinc has been a major beneficiary. The fallout from the commodities recession resulted in significant shutdowns of mines and production. Zinc production has fallen, as evidenced by tightening treatment and refining charges, and weak supply growth. Inventories have also declined since early 2013, both at smelters and in warehouses, but demand remains resilient, supported by ongoing global infrastructure spending.
We believe that the current supply and demand fundamentals in zinc are very supportive of this year's higher prices, which, in our opinion, may have the potential to climb even higher. Several significant catalysts, described below, are likely to continue to strengthen as the year progresses and should be supportive of zinc over the next three to six months.
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Strong Catalysts for Zinc Lack of Capital Spending by Mining Companies
Among the big six base metal mining companies, capital spending, both growth capital and sustaining capital, peaked at about $80 billion in 2012 and has contracted yearly since then to approximately $23 billion in 2016 (see Chart B). This is due to subdued prices, lower margins, and, in particular, stretched balance sheets. Drastically reduced capital spending has resulted in a drop-off in mine production, with zinc ore being among the most impacted.
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Falling Zinc Ore Production
....see: https://seekingalpha.com/article/4006332-zincs-year-remember-supply-side-story
Falling Inventories
....see: https://seekingalpha.com/article/4006332-zincs-year-remember-supply-side-story
Resilient Demand
....see: https://seekingalpha.com/article/4006332-zincs-year-remember-supply-side-story