The copper supply chain faces its "most intense moment in history": fierce competition between mines and smelters, metal premiums soar to record levels!

The global copper market is experiencing the tightest period in supply chain history.

On November 28, according to media reports, at an industry conference held in Shanghai this week, miners and smelters held intense negotiations over processing fees. Miners pressured smelters to accept a record low level for the benchmark processing fee, while the annual premium for refined copper shipped to China jumped to an all-time high.

Nicholas Snowdon, Head of Metals Research at Mercuria Energy Group, said during the conference, "This is a historically tense moment for the copper supply chain." Factors such as supply-demand imbalances and uncertainty over Trump’s trade policy have jointly fueled this market turmoil.

The report states that the intensity of the price negotiations is extraordinary. Executives at German copper smelter Aurubis AG said they are prepared to reject excessively low annual processing fee benchmarks and expressed dissatisfaction toward "negative processing fees"—meaning smelters would actually have to pay miners for processing raw materials. Leading Chinese metals industry associations also oppose the "unsustainable" negative processing fee.

Analysis points out that the impact of this contest is spreading globally. As the U.S. attracts large quantities of refined copper due to expected tariffs, suppliers such as Chile’s Codelco have offered a record premium of $350 per ton to certain Chinese customers.

A direct confrontation between smelters and miners

Years of disorderly expansion in smelting capacity, combined with a series of unexpected supply interruptions this year, have put miners in a dominant position during negotiations. For most of this year, spot processing fees—which usually serve as guidance for annual contracts—have remained in negative territory.

This has led to a deadlock in negotiations, with some participants possibly withdrawing from the global pricing system for smelters and major miners to reach initial benchmark agreements with Chinese processors. This would make it harder for both sides to plan supply for the entire year.

Tim Kurth, Chief Operating Officer of Aurubis Custom Smelting, urged miners to think long-term and avoid "a kind of war." He said if this conflict can be avoided, the benchmark pricing system can be retained—especially as smelters begin to control the growth of excess capacity and more mine supply emerges.

Chinese leading metals industry associations, as both sides begin annual contract negotiations, strongly oppose the "unsustainable" negative processing fee. The miners’ tough stance stems from pressure accumulated over years of excessive smelting capacity expansion, a situation aggravated by this year’s unexpected supply disruptions.

US premiums trigger global "extreme mismatch"

According to the report, traders and producers once again expect a large volume of refined copper to flow to the United States, where prices are driven up by continued expectations of import tariffs. Snowdon said that by the first quarter of 2026, the US could hold 90% of the world’s copper inventory.

This will create a chain reaction. The more copper cathodes the US absorbs, the more severe the shortages in other markets. Suppliers such as Chile’s Codelco are unhesitant in offering record premiums of $350 per ton to certain Chinese customers.

Snowdon called this "extreme mismatch," and stated that the "strength of this pull should not be underestimated, nor the scarcity risks that copper markets outside the US will face in the next three to six months." Changes in the flow of refined copper are reshaping the global supply landscape; the surging premium reflects intensified regional supply tightness.

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