Orient Securities released a research report stating that the 2026 copper concentrate long-term treatment charge (TC) benchmark being set to zero highlights the structural contradiction between copper ore supply and the smelting sector. Traditional demand bottoming out, combined with robust growth in emerging sectors, suggests the supply-demand imbalance in the ore market may persist, supporting the central price level of copper. In the medium term, with the resumption of large mines and adjustments in the domestic smelting industry, there is potential for marginal improvement in treatment charges. The report recommends focusing on resource-rich mining companies and leading smelters with improving self-sufficiency rates. The main views of Orient Securities are as follows:
The 2026 copper concentrate long-term TC benchmark being set to zero highlights the contradiction between copper supply and the smelting sector. On December 19th, representatives of Chinese copper smelters and Antofagasta finalized the 2026 copper concentrate long-term TC benchmark at $0 per tonne and 0 cents per pound, a significant decrease compared to the 2025 benchmark of $21.25 per tonne and 2.125 cents per pound. Statistics show that since 2025, unexpected disruptions such as mine earthquakes, mudslides, and delays in tailings management facility development have led to cumulative downward revisions of over 500,000 tonnes in annual production guidance from the mining side; 2025 copper concentrate supply is expected to be largely flat compared to 2024. The significant decline in the 2026 benchmark compared to 2025 further underscores the structural supply-demand imbalance where copper ore supply falls short of electrolytic copper smelting demand, suggesting continued pressure on the copper smelting sector.
With traditional demand bottoming out and significant incremental demand from emerging sectors, the supply shortage in the ore market may continue. Looking at downstream copper consumption sectors, traditional power distribution remains the largest segment, accounting for approximately 28% of demand, while emerging sectors like new energy power generation are experiencing rapid growth. According to International Energy Agency (IEA) statistics, copper demand from clean energy reached 7.737 million tonnes in 2024, a 28.9% increase compared to 2021. The report believes that against a backdrop of sustained high global grid and power investment, and with power grid operational lifespans in Europe and the US nearing or exceeding their design endpoints, future upgrades to global grid and power infrastructure could underpin copper demand. Furthermore, incremental copper demand from sectors like new energy power generation is promising amid the global transition to clean energy. Given limited supply growth from copper mines and expectations of sustained downstream demand growth, the ore supply shortage may persist, potentially supporting a continued upward trend in the central copper price in the medium term.
Following the resolution of pessimistic expectations for smelting fees, medium-term mine output increases coupled with expectations of "anti-involution" measures in smelting could lead to marginal improvement in spot treatment charges. Although the fundamental supply-demand imbalance for copper concentrate may not change in the medium term, there is potential for marginal improvement in the contradiction from both the supply and smelting sides. The world's second-largest copper mine, Grasberg, has announced restart and production resumption plans, with output expected to grow steadily during 2026-2027. Meanwhile, restart negotiations for First Quantum's Cobre Panamá mine, which can supply about 1.5% of global copper output, are expected to begin in early 2026. The report believes that as medium-term mining disruptions are gradually resolved, the return to normal production at mines like Grasberg and Cobre Panamá could significantly contribute to ore supply increments, thereby easing the supply-demand contradiction between copper ore and smelting. Combined with expectations for the implementation of "anti-involution" measures in domestic copper smelting, spot treatment charges for copper concentrate are expected to improve upwards. The report is optimistic about the potential for profit improvement at copper smelting enterprises under these easing expectations and maintains a positive outlook for simultaneous marginal increases in both ore prices and treatment charges in the medium term.
Investment recommendations and targets: For the copper mining sector, focus on Zijin Mining Group (601899.SH), which has large resource reserves and expectations for sustained medium-term production expansion. Other targets include: China Molybdenum (603993.SH) and JCHX Mining Management (603979.SH). For the copper smelting sector, focus on Tongling Nonferrous Metals Group (000630.SZ), one of China's largest copper smelters, where output from the Mirador copper mine resource is expected to提升 copper concentrate self-sufficiency rates. Other targets include: Jiangxi Copper (600362.SH).
Risk warnings include: Macroeconomic fluctuations affecting downstream copper demand; risks associated with the implementation of "anti-involution" measures in copper smelting falling short of expectations; and risks of medium-term copper smelting capacity expansion exceeding forecasts.
