"Processing copper concentrate at a loss? China Nonferrous Metals Industry Association: Firmly Opposed to Irrational Industry Practices"

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The China Nonferrous Metals Industry Association has made a clear statement opposing the phenomenon of zero treatment charges or negative treatment charges in the copper smelting industry, and has called on the global copper industry to address this "unsustainable structural contradiction." This is the first time Chinese authorities have sent a strong signal regarding the pricing chaos that disrupts industry order.

According to media reports, Chen Xuesen, Vice President of the China Nonferrous Metals Industry Association, said at an industry conference held in Shanghai on Wednesday that negative treatment charges seriously damage the interests of copper smelting industries worldwide, including China. Negative treatment charges mean that smelters are actually "paying out of pocket" to process copper concentrate—a highly unusual situation that has challenged the long-standing pricing benchmarks in the global copper industry.

This is the first public statement from China's industry regulator on the chaos in the treatment charge market. Treatment and refining charges (TC/RC) are the fees smelters earn by converting ore into metal. This year, due to scarce raw materials, these charges have plunged to historic lows.

Authorities Clearly Oppose Negative Treatment Charges for the First Time

Chen Xuesen made strong remarks at the conference, directly addressing the harmfulness of negative treatment charges:

The China Nonferrous Metals Industry Association firmly opposes any zero or negative treatment charges in copper concentrate processing;

We urge the global copper industry to confront this unsustainable structural contradiction and promote cooperation among relevant countries and stakeholders.

Chen Xuesen revealed that China is drawing on experience from the aluminum industry and taking measures to manage copper smelting capacity. China has already halted about 2 million tons of illegal capacity to curb overexpansion; these capacities were under construction or in the planning stage.

In the coming years, China will prioritize the development of new smelting capacity using scrap rather than imported copper concentrate.

"We will see the effects of copper supply-side reforms within two to three years," Chen Xuesen said. This policy shift aims to reduce reliance on imported copper concentrate while easing the pressure of excess capacity.

The root cause of treatment charges dropping to historic lows lies in the structural imbalance between raw material shortages and excess smelting capacity. Rapid expansion of smelting capacity has collided with mine shutdowns in many regions globally. This year, spot treatment charges once dropped to an extreme negative $60/ton, raising concerns about the industry's sustainability.

Negative treatment charges have posed a fundamental challenge to traditional pricing benchmarks. All global copper smelters have suffered under low treatment charges: Japan's JX Advanced Metals announced it would cut tens of thousands of tons of capacity this year; Glencore Plc's Mount Isa smelter and refinery in Australia received government aid to sustain operations for three years.

Despite low treatment charges, Chinese smelters can still continue operating, partly because they own some mining assets and have benefited from rising prices of refined copper and byproduct sulfuric acid. Copper prices reached a record high of over $11,200 per ton at the end of October, offering smelters some buffer.

Long-Term Contract Negotiations Enter Fierce Game

Some analysts believe that, in the absence of significant improvement in global mine supply and with stable demand for refined copper in China, the pressured state of treatment charges is unlikely to fundamentally reverse in the short term. The market is waiting to see whether the upcoming 2026 long-term contract negotiations can provide a more sustainable pricing mechanism for the industry.

Analysts generally take a cautious attitude. After nearly a year of significant reductions in treatment and refining charges (TC/RCs), mining companies are expected to use current market conditions to push for supply agreements that better suit the situation.

The core issue in current negotiations is whether the long-used benchmark system can continue to apply. Analysis shows that, due to significant differences between the spot market and long-term agreement terms, the pricing model—in which major miners and Chinese smelters reach an agreement and other regions follow suit—may be adjusted. The market is shifting towards more bilateral agreements, setting price ranges, and even exploring cyclical pricing.

Major miners such as Freeport-McMoRan have indicated they are considering various cooperation solutions and are closely monitoring smelters’ operating conditions. Craig Lang, an analyst at CRU Group, noted that the annual benchmark system is expected to undergo “further adjustments,” and future negotiations may become more diverse and complex.

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