"Never seen such a poor situation," remarked a source from a copper smelting plant regarding the recently settled long-term contract price for copper concentrate at "zero processing fees." The 2026 copper concentrate treatment and refining charges (TC/RC) have preliminarily settled at an unprecedented "zero fee." Interviews with multiple industry sources reveal that, amidst the structural contradiction between strong mining-end dominance and an oversupply of smelting capacity, the "zero fee" agreement, while avoiding the anticipated "negative" outcome through intense negotiation, still highlights the harsh reality of profits concentrating upstream. However, domestic large-scale smelters are finding a glimmer of survival, buoyed by soaring prices of by-products like sulfuric acid and comprehensive benefits from improved processes. Behind this extreme game lies the global dilemma of increasingly tight copper mine supply and sustained pressure on the smelting sector.
The preliminary settlement of "zero processing fees" serves as an industry warning born from fraught negotiations. At a time when copper prices are repeatedly hitting record highs, a survival-of-the-fittest game is unfolding within the copper industry chain. "This year's negotiations between Chinese smelters and Chilean miner Antofagasta were somewhat tense. According to past practice, a consensus is usually reached during the Asia Copper Week in late November, but this year it was delayed by nearly half a month," an industry chain source stated. Public statements from industry associations epitomized this tense negotiation. At the 2025 World Copper Conference held in late November, the China Nonferrous Metals Industry Association expressed firm opposition to free or negative processing of copper concentrate, calling on the global copper industry to正视 this unsustainable structural矛盾. Around December 20, Chilean mining company Antofagasta and a leading domestic copper smelter reached an agreement, setting the 2026 TC/RC at $0 per tonne and 0 cents per pound respectively, lower than the 2025 rates of $21.25 per tonne and 2.125 cents per pound. This means smelters will receive zero compensation from miners for processing copper concentrate.
Regarding the "zero fee," Ye Jianhua, Director of SMM's Industry Research Department, commented, "Before the Asia Copper Week meeting in late November, market expectations were generally negative. Thanks to appeals from parties like the domestic nonferrous industry association, market sentiment improved, and achieving a zero fee was already quite difficult." Ye also mentioned that, given the current tight supply of copper concentrate, few domestic smelters have secured long-term contracts with "zero fees," and there are no signs of improvement in spot processing fees currently. Choice data shows that spot TC for copper concentrate has been negative since late January 2025, hovering around -$40 per tonne since the second quarter. An industry insider suggested that, from the perspective of combating "internal involution" and promoting sustainable development, the "zero fee" holds a certain警示 significance for the domestic copper smelting industry and might prompt relevant authorities to introduce further measures.
Notably, due to rising by-product prices and high smelting recovery rates, some smelters might still remain profitable even with zero concentrate processing fees. Institutional data indicates that sulfuric acid prices have surged over 50% this year, breaking the 1,000 yuan per tonne mark and remaining near historical highs; the sulfuric acid revenue from producing one tonne of copper from sulfide ore is roughly 2,500 yuan. Simultaneously, advanced domestic copper smelting technology, coupled with high recovery rates and the current high copper price level, contributes an excess profit of around 1,200 yuan per tonne of copper. Additionally, precious metal by-products like gold and silver concentrated in copper ore also generate some revenue. An investor inquiry to Tongling Nonferrous Metals Group Co.,Ltd. revealed that, when considering recovery rates and by-products comprehensively, smelters can maintain certain comprehensive benefits under "zero fees" and thus continue production.
It is important to clarify that copper concentrate processing fees are the "bridgehead" contested between miners and smelters. When mine supply is abundant and smelting capacity is relatively scarce, processing fees rise, leading to substantial smelting profits. Conversely, when ore supply is tight, processing fees are squeezed, and profits concentrate upstream with the mines. The core of the current game lies in oversupplied smelting capacity versus tight mine-side supply.
Within the copper industry chain, the current overcapacity is primarily concentrated on the smelting end. A source from a large domestic copper smelter informed that "since last year, copper mine supply has been tight, while domestic copper smelting capacity has grown rapidly. The industry is now in a consolidation phase. Large smelters primarily rely on long-term contract guarantees, whereas small and medium-sized smelters, with their higher comprehensive costs and weaker competitiveness, are struggling to survive." Institutional data shows that from 2018 to 2024, China's electrolytic copper smelting capacity grew from 9.54 million tonnes to 14.53 million tonnes, a CAGR of 7.26%; during the same period, electrolytic copper production increased from 8.5698 million tonnes to 11.6501 million tonnes, a CAGR of 5.25%. The expansion rate of smelting capacity has exceeded production growth, leading to persistent overcapacity, with the average annual capacity utilization rate declining from 89.83% to 80.18%.
Under this industry-wide pressure, the performance of leading copper smelters has also been impacted. Tongling Nonferrous Metals Group Co.,Ltd., which has the largest cathode copper capacity in China, reported increased revenue but decreased profit in the first three quarters of this year. Its revenue reached 121.893 billion yuan, a year-on-year increase of 14.66%, while its net profit attributable to shareholders fell 35.14% year-on-year to 1.771 billion yuan. Yunnan Copper Co.,Ltd. saw its cathode copper gross profit margin drop to 1.94% in the first half of this year, hovering near recent lows. In fact, to strengthen their bargaining position in long-term contract negotiations, copper smelting enterprises have planned production cuts. The China Smelters Purchase Team (CSPT) meeting in late November announced that, due to persistently low copper concentrate processing fees, member companies would reduce their copper-in-concentrate production load by over 10% in 2026.
On the mining end, companies have significantly benefited from the current upward trend in copper prices. Leading copper miner Cmoc Group Limited reported a net profit attributable to shareholders of 14.28 billion yuan for the first three quarters, a surge of 72.61% year-on-year, already exceeding its full-year profit for last year. From a global perspective, "black swan" risks on the supply side remain a dominant factor influencing copper market trends. This year, major accidents occurred at several world-class mines in key producing regions like Indonesia, Chile, and the Democratic Republic of Congo, disrupting normal global copper mine production. Ye Jianhua stated that global copper mine supply growth is expected to be around 3% in 2026, with increments mainly coming from China, Russia, Mongolia, and South America. By 2027, with the restart of previously disrupted mines, growth is anticipated to be around 4%. However, in the long term, challenges for mine-side supply are significant, influenced by declining grades at aging mines, limited incremental contributions from greenfield projects, and particularly the fragmentation of global copper resource flows following its rising status as a strategic metal in recent years.
BHP Group, one of the world's largest copper producers, recently saw its CEO Mike Henry publicly state that copper demand is expected to grow by 70% from now until 2050, but supply is becoming increasingly difficult to unlock. New mines are fewer, discovered deposits are often smaller, lower-grade, and located in more challenging regions, making rapid development difficult. Disturbances at just a few global copper mines can quickly shift the market into deficit, driving copper prices to new highs.
Regarding future copper prices, Ye Jianhua expressed that, in the short term, global liquidity easing and potential disruptions from US monetary policy provide strong support for high copper prices. Long-term, given persistent mine-side supply tightness, positive demand expectations from global energy transition and the rise of the AI industry, coupled with valuation increases as more countries designate copper as a critical metal, he remains偏 optimistic about future copper prices. A representative from Cmoc Group Limited indicated that on the copper mine side, limited new capacity and delays in some incremental supply releases will make tightness increasingly prominent. Combined with shortages of recycled copper in some regions, the supply structure might face regional imbalances. On the demand side, based on current industry trends, AI-driven data center construction and its associated copper demand represent a certainty. Simultaneously, accelerated investments in power grids and the new energy sector will continue to support growing copper demand momentum. These factors, combined with expectations of global economic recovery and looser liquidity prospects, will collectively support copper prices.
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