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Copper Crisis: Smelters Paying to Process Metal Amid Supply Glut

Sarah Johnson

 

📉 Today’s Copper Market Shock (June 20, 2025)

Copper smelters are facing an unprecedented pricing crisis: they are now paying miners for concentrates rather than profiting from processing them. This reflects a negative treatment and refining charge (TCRC) a charge historically seen as revenue now stuck around –$45/ton for spot deals. Overcapacity, especially in China, is overwhelming the market, disrupting traditional pricing.

🏭 Causes: Too Many Smelters, Too Few Mines

  • Surplus Smelting Capacity: China’s smelters ramped up production so fast that mine output can’t keep up.

  • Mine Growth Outpaced: While global mine output rose modestly (2–3%), smelting supply surged (~11–14%).

  • Exports Cut Off: Indonesia recently halted concentrate exports, worsening global shortages.

The imbalance has already shut down some Western smelters Glencore in the Philippines and Sinomine in Namibia and could trigger more closures.

🎯 Market Impact & Investor Activity

  • Futures Trading: Today, copper futures saw significantly higher activity (54,140 contracts traded), though open interest dipped slightly.

  • Geopolitical Volatility: Amid Middle East tensions, the U.S. dollar has strengthened, further pressure on copper prices trading early around $4.80/lb (≈ $9,600/ton).

🔄 Pricing System Under Scrutiny

Copper contracts are still based on outdated annual or semi-annual benchmarks. These are ill-suited for today’s fast-moving conditions, locking in losses for smelters. There’s growing momentum for shifting to dynamic pricing quarterly or spot to better align with reality.

⚠️ What Lies Ahead?

  • More Closures Likely: Western smelters may continue to shut down under tight margins until capacity rebalances.

  • Indonesia’s Role: If major concentrate exporters like Indonesia maintain their export halt, shortages could deepen.

  • Pricing Reform: A move toward more frequent, demand-sensitive pricing would help alleviate future mismatches.

💡 Takeaways for Stakeholders

  • Smelters are grappling with steep losses and must adapt operationally or strategically.

  • Miners currently benefit but could face volatility if pricing systems reset.

  • Investors & Traders should monitor futures volumes and shifts in TCRC, which may signal impending consolidation or regulatory changes.

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