There is a number in the copper market right now that reads like a typo. Smelters, the industrial plants that cook raw copper concentrate into refined metal, are no longer charging miners for that service. They are paying miners for the right to do it. The fee that has underwritten the smelting business for generations went negative in 2024 and has kept sinking since. Copper setting record highs is the story that gets written up. This quieter number is the one that tells you where the money in the copper chain is actually moving, and it has been flashing for a while.
The fee nobody outside the industry has heard of
Start with the mechanics, because they matter here. A copper mine does not ship pure metal. It ships concentrate, a powder that is mostly rock and sulphur with copper mixed through it. Someone has to smelt and refine that material into cathode. The smelter’s pay for that work is called the treatment and refining charge, or TC/RC, and it gets deducted from what the miner receives. For decades the number was set once a year in a benchmark negotiation between one large miner and the big Chinese smelters, and the rest of the industry simply adopted the same terms.
That negotiation used to be an argument over whether the fee would be $70 a tonne or $90. In January 2026 it settled at zero. The International Energy Agency, which tracks this closely, called it the lowest annual benchmark ever agreed. The spot market, where material trades outside those contracts, is well past zero. Spot treatment charges have been negative since 2024, and by the end of June they had fallen to roughly negative $127 a tonne. Sprott’s copper team put the figure below negative $150 in its August report, a reversal of more than $240 a tonne from where charges sat in late 2023.
Read that again. A smelter buying concentrate today hands the miner the full value of the contained copper, then adds money on top for the privilege.
How the industry got here
Two things happened at once, and they pushed in the same direction.
China built smelters. A great many of them. Since 2005, according to IEA figures, China has accounted for over 90 percent of the growth in global copper smelting output, lifting its share from around 15 percent to roughly half of world supply by 2025. Capacity on that scale needs feed, and feed is the one thing nobody has been able to conjure.
Because the mines have been going the other way. Chile, the largest copper producing country on earth, reported first half output at its weakest since 2018 and cut its forecasts, now expecting production to fall this year before any recovery. That is not a maintenance blip. Much of Chile’s copper capacity was built decades ago and is fighting declining grades, water constraints and aging infrastructure. The problem generalizes. The average ore grade at copper mines worldwide has dropped about 40 percent since 1991. Only about 5 percent of the copper deposits found in the last 35 years were discovered in the past decade. The stretch from discovery to production runs around 17 years. Even brownfield expansions, supposedly the cheap option, have seen capital intensity climb roughly 65 percent since 2020.
So you have a wall of smelting capacity chasing a shrinking pool of freely traded concentrate. The price of that concentrate kept rising until the fee for processing it went below zero. That is what a shortage looks like when it shows up in a contract rather than on a chart.
Why smelters keep bidding anyway
The obvious question is why smelters do not simply stop. If processing income is zero or worse, shut the furnace.
The answer is that treatment charges were never the whole business. A smelter also sells the sulphuric acid produced during processing, recovers gold and silver riding along in the concentrate, captures copper above the contracted payable level, and earns premiums on cathode and downstream products such as wire rod. With precious metals near records and acid prices elevated, those side revenues have been carrying the load. Sprott points to the Iran conflict disrupting Middle East sulphur trade, a region responsible for close to half of global sulphur flows, and to China suspending sulphuric acid exports. Both pushed acid prices higher and handed smelters an unexpected cushion.
Chinese smelters have additional insulation. Many are state owned, some run to physical output targets rather than profit targets, and their cost base is lower. The plants most exposed to negative charges are therefore custom smelters outside China, the ones that buy all their feed on the open market with no mine or fabrication business to lean on. Several have already moved. Mitsubishi Materials in Japan has signalled it will cut primary copper smelting volumes by 30 to 40 percent by 2035, and the Australian government put roughly $395 million behind Glencore’s copper smelter in late 2025 to keep it open. China’s largest smelters agreed to trim output by more than 10 percent in 2026, and Beijing halted around two million tonnes of planned new capacity.
Is that enough to rebalance the market? The IEA’s read is that it is not, and that low charges are likely to persist over the medium term.
The benchmark itself is coming apart
Here is the part with real consequences. The annual benchmark works only if participants keep using it, and they are drifting away. Antofagasta, the Chilean producer whose deals have set the industry reference for years, agreed to price mid year concentrate sales to some Chinese smelters against spot indexes rather than fixed terms. BHP, the largest copper producer in 2025, has already been pricing substantial volumes off spot indexes. Freeport has moved away from a benchmark it helped define for decades. Traders, meanwhile, are locking up multi year concentrate and anode supply through prepayment deals that sit outside the TC/RC framework entirely.
When the anchor contract stops anchoring, everyone gets marked to the real market. And the real market says concentrate is scarce.
What it means if you own the miners
The setup for producers is unusually favorable, and the numbers show it. Copper finished July at $13,836 a tonne on the London Metal Exchange and printed a record $14,334 on August 10, up roughly 45 percent over the prior twelve months. Sprott’s copper miners index gained about 84 percent over that same year. Producers are collecting near record metal prices while smelters pay them to take the concentrate. All in sustaining cost margins, by Sprott’s reckoning, sit at levels the sector has not seen in decades, and because mining costs are largely fixed once a pit is running, incremental price flows disproportionately into cash flow.
That is the bull case, and it is coherent. The honest counterweight comes in three parts.
First, this margin structure leans partly on gold, silver and acid staying elevated, since those revenues are what keep smelters bidding at all. If by-product prices correct hard while charges stay depressed, smelters close, and miners lose optionality about where to send their material. Second, the IEA’s warning deserves attention. If custom smelting outside China rationalizes away, copper’s midstream ends up as concentrated as rare earths and nickel already are. China is currently the top refiner for 19 of 20 strategic minerals, with an average share near 70 percent. A miner with one realistic buyer is not in a strong position, however tight the ore market may be. Third, record prices have not yet produced new mines, and on a 17 year development clock they will not soon. The IEA’s work on the project pipeline points to a potential 30 percent copper supply deficit by 2035.
Negative treatment charges are not a forecast. They are a receipt. They record that the scarce thing in copper today is rock in the ground rather than furnace capacity to process it, and that the industry’s pricing conventions were built for a world that no longer exists. Whether that condition persists long enough to matter for any particular company depends on grades, jurisdiction, balance sheet and a dozen other things a headline price cannot capture. But anyone trying to work out why copper equities have behaved the way they have this year is better served watching the fee than the ticker.
___________________________________________________________________________________________________________
This article is written for educational and informational purposes only and does not constitute financial or legal advice. The views and analytical frameworks presented draw on publicly available information and reported commentary from industry participants. Readers are encouraged to consult primary sources and form their own informed views on these complex topics.
