A long-standing pricing framework that underpins the global copper-processing sector is heading toward a critical test as the industry enters a new round of negotiations this week. The annual discussions, set against a backdrop of constrained concentrate supply and heightened geopolitical tensions, are taking place in Shanghai, where miners and smelters traditionally attempt to establish treatment and refining charges—known as TC/RCs—for the coming year.

This time, however, several participants expect the structure that has guided copper processing for decades to come under unprecedented stress. The challenge stems from a supply imbalance that has widened as processing capacity—especially in China—has grown faster than mined copper output. Analysts say this divergence has eroded the predictability of yearly benchmarks and raised the likelihood that some parties may pursue alternative pricing arrangements for 2026.

Pressure Building Around the Benchmarking Process

The annual system operates on an assumption that major miners and China’s smelters strike an agreement first, creating the figure that the rest of the industry generally adopts. But the severe drop in fees this year has created uncertainty over whether that model remains sustainable.

TC/RCs collapsed to record lows, and a “further breakdown” in the benchmark is expected, according to Craig Lang of CRU Group. He said companies are already exploring the possibility of bilateral contracts, caps and floors on fees, or more frequent pricing such as quarterly settlements.

Panmure Liberum analysts led by Tom Price described the unfolding dynamic as “a brutal game of industrial survival,” noting it will frame the upcoming negotiations for 2026.

China’s Expansion at the Center of the Dispute

Much of the strain originates in China, which has continued to rapidly expand its smelting capacity despite falling processing fees. Spot treatment charges have turned negative at times—dropping to as low as minus $60 per ton this year—meaning processors have effectively paid miners to access concentrate.

While some Chinese smelters have managed to remain profitable due to strong prices for refined copper and sulfuric acid, this environment has contributed to closures or distress in smelting operations outside China. China’s refined copper output rose 9.7% in the year through October, and its producers have been able to capitalize on elevated refined metal prices, which remained steady at $10,777 a ton on the London Metal Exchange by midday Monday in Shanghai. The price is below but still close to the record above $11,200 reached in late October.

Panmure Liberum analysts said China is “crowding out players abroad by securing the lion’s share of global concentrate supply and crushing the trade’s fee structure.”

Li Chengbin at Mysteel Global pointed to the widening gap between term TC/RCs and spot markets as another factor undermining confidence in the benchmark system. He said there are increasing concerns over how much concentrate Chinese smelters will be able to secure through annual contracts.

Smelters Outside China Push Back

Across multiple countries, smelters are seeking better contractual terms in response to deteriorating economics. A notable shift has emerged among Japanese operators, which are coordinating to strengthen their position against miners. Mitsubishi Materials Corp. said conditions have “significantly deteriorated,” underscoring the pressure on non-Chinese processors.

Government agencies have also intervened. In October, ministries from Japan, South Korea and Spain issued a joint statement criticizing what they described as punitive TC/RCs and warning against “policies and practices that may not reflect fair market dynamics.”

Operational strain is already visible. JX Advanced Metals Co. in Japan announced an output reduction measured in the tens of thousands of tons. In Australia, Glencore Plc received a government bailout to keep its Mount Isa smelter and refinery operating for an additional three years.

Some miners are also reconsidering their participation in the annual benchmark. Freeport McMoRan Inc. has signaled it may pursue alternative pricing strategies based on concerns about the long-term viability of its smelter customers.

A Structural Shift in Concentrate Supply

While last year’s tight concentrate market initially appeared temporary, disruptions at major mines—together with China’s relentless additions to smelting capacity—have contributed to a more persistent supply squeeze. For much of the past decade, TC/RCs have generally moved in line with the balance of mined material and processing demand. The current divergence suggests a structural change rather than a short-term anomaly.

Analyst Xu Wanqiu of Cofco Futures said Chinese smelters are likely to continue securing raw material as long as they can afford to pay for it. Even if market conditions worsen, he expects only limited pullback from Chinese processors next year due to anticipated new capacity and efforts to support broader economic objectives.

As the industry gathers in Shanghai, companies on all sides are grappling with how to maintain operations in a system where fees have fallen to unprecedented lows. The outcome may determine whether the decades-old benchmarking structure remains viable or gives way to a more fragmented, individualized approach to copper processing contracts.

The talks are expected to be contentious. Miners, aware of the ongoing tightness in concentrate supply, are anticipated to push for tougher terms in 2026. Smelters outside China are warning that current economics threaten their survival. And Chinese smelters, despite facing low fees themselves, are still positioned to dominate raw material procurement due to their scale and the strength of refined copper and byproduct markets.

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