The pricing mechanism that underpins the global copper processing industry is set to face a significant stress test this week, with negotiations reaching a critical point. This occurs amidst heightened geopolitical tensions, constrained metal supplies, and the increasingly dominant position of China, which has left smelters in other regions struggling to remain competitive. The tensions have been escalating for several years, driven by a rapid expansion in metal processing capacity that has surpassed mined production levels. This imbalance is now raising questions about the entire benchmarking structure, a long-established process where major miners negotiate agreements with Chinese smelters, which then set the standard for the rest of the industry.
The critical moment is expected to occur during a major industry gathering in Shanghai in the coming days, serving as the backdrop for annual discussions. Miners are anticipated to push for even stricter supply terms for 2026, particularly after a year that saw annual treatment and refining charges (TC/RCs) plummet to record lows. These charges are what miners pay smelters to process copper concentrate into refined metal.
According to Craig Lang, an analyst with CRU Group, a “further breakdown” of the annual benchmark system is anticipated. He suggests that one-on-one talks could lead to more bilateral agreements, potentially at different levels compared to the Chinese annual benchmark. Other possible outcomes include the implementation of caps and floors on TC/RCs, or even a shift to quarterly pricing.
At the core of these tensions lies China, where the copper industry has continued to expand despite the plunge in annual fees and the emergence of negative spot charges, which effectively mean processors are paying miners to process ore. While some smelters in China have achieved substantial profits this year, closures have occurred in other parts of the world, highlighting the uneven playing field and the challenges faced by non-Chinese copper processors.
