China’s annual processing fee negotiations between smelters and global mining giants are facing unusually high risks. The global supply chain is in chaos, especially with copper concentrate being extremely scarce, putting mainland Chinese manufacturers in the most embarrassing situation in decades.
Despite China’s refined copper production accounting for about half of the global output, the high copper prices are hampered by imported raw materials. Currently, the global supply chain is facing the most severe shortage of copper concentrate in decades, partly due to the unexpected closure of major mines such as Cobre Panamá at the end of 2024, exacerbating the strain on sources.
Over the past few years, China has significantly expanded its smelting capacity, leading to a heavy reliance on imports – about 85% of the copper concentrate needed for Chinese factories comes from overseas. This structural imbalance between capacity expansion and source control has directly transformed global supply tension into a domestic crisis in China.
Amid the backdrop of extremely scarce raw materials, the Chinese copper smelters, who usually set the processing fee benchmarks for the world during annual negotiations, are receiving extremely low fees. According to Bloomberg, rumors abound in the industry during Asia Copper Week that smelters might soon have to pay processing fees to import ore.
In fact, this year’s spot treatment charges (TCs) have dropped to as low as negative 60 US dollars per metric ton.
According to data from Canadian miner Teck Resources Ltd., global smelters are currently operating at only 75% of total capacity, the lowest utilization rate on record.
Many smelters have been forced to reduce production. Industry concerns have risen that Chinese smelters may for the first time agree to sign long-term contracts with fees that involve “paying to process”. A senior executive described it to Bloomberg as “the money from selling bread doesn’t cover the cost of buying flour”.
This crisis has shaken the foundation of copper pricing in the global market for decades.
Chilean miner Antofagasta reached a historic annual benchmark price of $21.25 per metric ton with Chinese smelters in 2025, and a mid-year agreement with zero fees ($0 per ton), marking a historical low and demonstrating the absolute advantage of the ore supply side.
American mining giant Freeport-McMoRan has publicly warned that it is considering terminating the use of global benchmark prices in 2026 in favor of individual contracts, citing continued low processing fees that endanger the survival of its smelting plant customers. This move could lead to a complete collapse of the global copper concentrate pricing system. If realized, Chinese smelters will have to turn to more expensive and unpredictable bilateral negotiations, further weakening their bargaining power.
Codelco, Chile’s national copper company, has proposed record-high premiums on refined copper products to Chinese buyers, leading to at least three Chinese customers preparing to abandon long-term contracts and turn to spot trading, further exacerbating market uncertainty.
Chen Xuesen, Vice Chairman of the China Nonferrous Metals Industry Association, publicly expressed his opposition to the practice of zero refining fees or even paying to process, stating that this would “seriously harm the interests of the global copper smelting industry, including China”.
This crisis directly threatens Beijing’s national economic planning. Stable copper supply is crucial for China’s “new quality productivity” strategy in the 15th Five-Year Plan, which highly depends on industries with high copper consumption such as electric vehicles, clean energy, and grid upgrades.
If the negotiations break down, trade will shift to the unpredictable spot market, making it more difficult for China to ensure stable supply for its industrial needs.
Beijing has announced a halt to the construction of approximately 2 million metric tons of new planned smelting capacity, a direct response to domestic overcapacity and the collapse of processing fees.
(This article is based on reports by Bloomberg)