Nexa’s unified approach balances a zinc market teetering between current supply constraints and the potential for excess in 2026

Nexa's 2025 Financial Turnaround

In 2025, Nexa achieved a remarkable financial recovery, shifting from a substantial net loss in 2024 to a strong profit. The company reported a net income of $223 million for the year, a significant improvement compared to the previous year's $187 million loss. This positive change was largely driven by an exceptional fourth quarter, during which Nexa posted earnings per share of $0.60, surpassing forecasts by nearly 20%. Revenue for the quarter reached $903 million, exceeding expectations by 16.5%.

The surge in profitability was fueled by a substantial increase in cash flow. Adjusted EBITDA for Q4 climbed to $300 million, marking a 61% rise from the previous quarter and a 53% increase year-over-year. The EBITDA margin expanded to 33% in the fourth quarter, up from 24% in Q3. According to the CEO, this performance was the result of higher realized prices for zinc and other by-products, combined with consistent operational execution.

This momentum extended beyond a single quarter. For the full year, adjusted EBITDA totaled $772 million, up 8% from 2024, primarily due to stronger zinc and by-product prices. The results highlight how elevated metal prices, especially zinc, had a direct and significant impact on profitability. However, Nexa also emphasized its strong operational performance, with mining costs meeting expectations. The company set a five-year quarterly record by producing 91kt of zinc in Q4, demonstrating its ability to take advantage of favorable market conditions.

Ultimately, Nexa's earnings outperformance reflects a favorable zinc market environment in late 2025. Elevated prices boosted revenue, while disciplined operations and increased production amplified profits. This sets the stage for a closer examination of the factors influencing zinc prices and the sustainability of the current supply-demand balance.

Zinc Market Dynamics: Balancing Surplus Risks and Price Support

The zinc market is currently experiencing a delicate balance. Prices are being propped up by supply limitations and rising production costs, yet forecasts indicate a growing surplus. This tension is central to determining whether the recent price rally can be sustained.

As of March 10, 2026, the LME zinc price was $3,363.70 per tonne, a notable increase from the previous year but slightly below the three-year peak of $3,430 reached in January. Two main factors support these price levels: higher operating costs for refiners, driven by increased power prices amid geopolitical uncertainties, and deliberate supply reductions. Despite a 5.4% rise in global mined zinc output, refined zinc production outside China dropped by 1.6% recently, reflecting cutbacks in Kazakhstan and Japan. Additionally, zinc inventories remain historically low, with LME stocks at 106,925 tonnes as of February 9, making the market sensitive to supply disruptions or unexpected demand.

Looking ahead, the risk of surplus becomes more pronounced. Refined zinc output is projected to grow by 2.4% to 14.13 million metric tons in 2026. This follows a period of stagnant prices in 2025, as demand from construction and manufacturing sectors was hampered by high interest rates and trade uncertainties. While current price strength is supported by tight supply and elevated costs, it may not be enough to counteract the anticipated increase in supply. With inventories at low levels, the market remains vulnerable to a sharp reversal if the surplus materializes.

In summary, the zinc market is precariously balanced. Immediate price support comes from limited inventories and high refining costs, but expanding refined output could eventually tip the scales toward a surplus. For now, low stockpiles help absorb shocks, but they also set the stage for increased volatility.

Nexa's Strategy: Cost Management and Operational Advantages

Nexa's business model is characterized by its integrated operations and efficient cost structure, which offer both advantages and challenges. In 2025, Nexa produced 316,000 tonnes of zinc at a consolidated C1 cash cost of $0.30 per pound. This metric, which reflects the cost of mining zinc after accounting for by-product credits, showcases the company's production efficiency. Nexa's vertical integration, including ownership of the largest zinc smelter in the Americas, helps shield it from fluctuations in treatment and refining charges (TCs), allowing it to extract more value from its own ore—a key advantage as TCs are expected to rise.

Management has identified ongoing challenges in its Brazilian smelting operations and lower TCs in 2025 as sources of volatility. These Brazilian facilities have consistently exerted cost and production pressures. However, Nexa anticipates that TCs will increase to over US$80 per tonne in 2026, which would enhance the profitability of its smelting segment and support margins. This expectation reflects the tight refined zinc market, where smelters compete for scarce concentrate supplies.

The company's outlook for 2026 is based on this favorable TC environment and predicts a slight uptick in metal sales volumes. Nonetheless, Nexa faces risks from commodity price fluctuations, inflation, supply chain issues, and potential disruptions from community or weather events. The recent increase in global mined output demonstrates the industry's capacity to boost supply. Nexa's ongoing challenge will be to maintain operational discipline and cost control, especially at its more volatile sites, to ensure its competitive cash cost position translates into sustained profitability amid the anticipated 2026 surplus.

Looking Forward: Catalysts and Risks for Nexa and the Zinc Market

The future for Nexa and the zinc market depends on several key factors. The most significant is the direction of LME zinc prices, which are influenced by global industrial demand, particularly from construction and automotive sectors reliant on galvanized steel. The recent price surge, with LME zinc reaching $3,363.70 per tonne, has been supported by tight inventories and high refining costs. However, the outlook is uncertain due to forecasts of a surplus. The International Lead and Zinc Study Group expects a larger surplus in 2026, following a period of flat prices in 2025. If demand from housing and manufacturing does not keep pace with rising supply, price support could weaken.

The main risk lies in this fundamental imbalance. With refined output projected to rise by 2.4% to 14.13 million metric tons in 2026, increased supply could put downward pressure on prices if demand falters. The recent decline from a three-year high illustrates the market's sensitivity to these dynamics. For Nexa, its strong 2025 results, driven by high prices, may not be repeatable if the surplus emerges as expected.

Nexa's ability to manage this risk will depend on operational performance. The company's guidance assumes a favorable cost environment, with treatment charges anticipated to exceed US$80 per tonne in 2026, which would bolster margins. Achieving this depends on maintaining stable operations, particularly at its Brazilian smelters. Any further disruptions could erode Nexa's cost advantage and threaten its financial outlook. Maintaining the low C1 cash cost of $0.30 per pound will also be crucial if zinc prices soften.

In conclusion, Nexa's long-term prospects are closely tied to the broader zinc market balance. While its integrated operations and cost discipline offer some protection, they cannot fully shield the company from shifts in supply and demand fundamentals. The coming quarters will reveal whether current price strength, supported by tight supply and high costs, can withstand the expected surplus in 2026. For now, the low inventory levels mean the market remains highly sensitive to changes in outlook.