Copper Hits Record as Concentrate Squeeze Hits Smelters
LME copper hit a record of about $14,875 a tonne this month. The price reflects a physical squeeze on mine concentrate that has pushed smelter processing fees below zero, and the year-end benchmark talks between miners and Chinese smelters will show how far that shift has gone.
LME copper touched a record of about $14,875 a metric tonne intraday on September 10 and has stayed near that level. Gold makes a useful contrast. At around $4,300 an ounce on September 23, spot gold is nearly a quarter below its January 28 intraday record of about $5,589, driven down by a stronger dollar and hawkish rate expectations. Gold prices financial insurance. Copper is pricing physical scarcity.
The copper squeeze sits upstream of the finished metal, and it is redistributing profits along the chain.
The squeeze in one number
Copper mines produce concentrate, which smelters convert into refined metal. Smelters are paid through treatment and refining charges (TC/RCs), a fee per tonne of concentrate that the miner deducts from the metal’s value. When concentrate is plentiful, those fees are high and smelters make money. When concentrate is scarce, smelters compete for it by accepting lower fees.
The annual benchmark set between major miners and Chinese smelters was $21.25 a tonne for 2025, already a fraction of the level a few years earlier. In December Antofagasta agreed a 2026 benchmark of zero with a Chinese smelter, the lowest on record. Spot fees have gone much further. Shanghai Metals Market’s spot treatment-charge index hit a record low of minus $221.89 per dry tonne on September 18, which means some smelters are paying miners for the right to process their ore. They do so to keep plants running and to earn money from by-products such as sulphuric acid and precious metals, but on the core business they are losing money on every tonne.
Mine disruptions made a tight market tighter. Last year’s mud-rush accident at Freeport-McMoRan’s Grasberg mine in Indonesia and a seismic event at Ivanhoe Mines’ Kamoa-Kakula complex in the Democratic Republic of Congo removed concentrate the market had counted on. At the same time, new smelting capacity, most of it in China, Indonesia and India, kept adding demand for concentrate.
Winners and losers along the chain
Miners with concentrate to sell are the clear winners. They collect the record metal price and pay almost nothing, or receive money, for processing. Producers with long-life copper resources and uninterrupted output, such as Southern Copper and Antofagasta, get the full benefit of higher prices without paying for processing. Freeport is a mixed case. It realised $6.17 a pound for copper in the second quarter, against $4.54 a year earlier, but the Grasberg accident cut the concentrate it has to sell just as that concentrate became most valuable. The mine is expected to run at about 65% of capacity in the second half and to return close to full output only by the end of 2027.
Smelters are the losers. Chinese smelters such as Jiangxi Copper and Tongling Nonferrous, Japanese refiners such as JX Advanced Metals and Mitsubishi Materials, and Europe’s Aurubis all depend on processing fees. Integrated groups with their own mines can absorb the squeeze. Independent smelters are running plants at a loss in the hope that fees recover. China’s smelter group CSPT pledged in December to cut 2026 capacity or output by more than 10%, but Chinese output still rose 7.4% year on year in the first four months, and some large smelters raised guidance. Only cuts that actually happen will restore fees.
Downstream fabricators carry a different cost. Cable makers such as Prysmian and Nexans mostly pass copper prices through to customers by contract, so their margins per tonne are protected. But they have to finance far more working capital for the same physical volume, because every tonne in inventory and in production is worth more. Transformer and switchgear makers with long fixed-price backlogs are more exposed. If they did not hedge or include metal-price escalation clauses, a record copper price turns contracted revenue into lower margins.
The pressure is building for policymakers as well. China built its smelting industry to control processing of the metal it needs for grids, electric vehicles and electronics. If Chinese smelters keep losing money on each tonne, Beijing will have to choose whether to support them, accept output cuts that make China more dependent on imported refined metal, or push its mining companies to secure more concentrate abroad. Each option shifts value between the countries that mine copper and the country that refines most of it.
Where the metal is
Inventory data show the squeeze unevenly. COMEX warehouses in the US held about 697,000 tonnes in mid-September, against about 254,000 tonnes in LME warehouses and 56,000 tonnes in Shanghai, so roughly 69% of stocks across the three exchanges now sit in the US. Traders moved metal there in case the US imposes tariffs on refined copper. The Commerce Department has recommended 15% from 2027 and 30% from 2028, but the White House has not yet decided. The combined exchange total can look comfortable while metal sits in the wrong place for the smelters and fabricators that need it in Asia and Europe. That split is also one reason the LME price is at a record while the global exchange total looks adequate.
The tariff trade will eventually reverse. When US demand for imports slows, some of the metal stored in COMEX warehouses will become available to the rest of the world. That will ease the refined-metal market, but it will not add a tonne of concentrate. The smelter squeeze depends on mine supply, not on where refined cathode is stored.
The call: a negative benchmark for 2027
Miners and Chinese smelters usually settle the next year’s benchmark treatment charge in the final weeks of the year. Those talks are the clearest test of the squeeze.
We expect the 2027 benchmark to be set below zero, which would be a first for the annual contract. Mine supply growth will not catch up with new smelting capacity in time, and miners have no reason to offer positive fees when spot fees are negative. A positive benchmark would mean Chinese output cuts had finally bitten, and we see no sign of that yet.
For investors, the implication is to own copper exposure at the mine rather than in processing. The price record rewards whoever controls concentrate. Until new mine supply arrives, which is years away for most large projects, smelters and fabricators will be paying for that record rather than benefiting from it.