Copper hits record highs as smelter margins collapse amid concentrate squeeze

By Romel S. Gurky

Copper prices have surged to record levels, briefly exceeding $14,500 per tonne intraday in January 2026, as supply disruptions and structural demand pressures converge, according to a new analysis by the International Energy Agency.

 Prices first crossed $12,000 per tonne in December 2025 and have been driven higher by mine disruptions, tariff related stockpiling in the United States, lower interest rates, a weaker dollar and increased financial investment. Strong demand expectations linked to electrification, electric vehicles, grids and artificial intelligence have added further upward pressure.

However, despite record copper prices, the midstream smelting sector is facing mounting stress.

Treatment and refining charges, the fees miners pay smelters to process copper concentrate, have fallen to historic lows. The 2026 annual benchmark settled at $0 per tonne in January following negotiations between Chilean miner Antofagasta and major Chinese smelters. Spot TC/RCs have been negative since 2024.

The decline reflects a surge in smelter capacity, particularly in China, that has outpaced growth in copper concentrate supply. Since 2005, China has accounted for more than 90% of global smelter output growth, increasing its share of global copper smelting from about 15% to roughly 50% in 2025.

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The IEA said copper could face a supply deficit of 30% by 2035 based on the current project pipeline. Ore grades have declined 40% since 1991, capital costs for brownfield expansions have risen 65% since 2020, and new discoveries have slowed sharply. Only 5% of deposits discovered over the past 35 years were found in the last decade. New projects typically take about 17 years from discovery to production.

While low TC/RCs have eroded smelter income, many facilities remain profitable due to high by product prices, including gold, silver and sulphuric acid. However, increased volatility in precious metals and acid markets raises uncertainty about how long this buffer can offset weak processing fees.

Integrated smelters linked to mines are better positioned to withstand low fees because they secure concentrate internally. Independent custom smelters that rely on market purchases are more exposed. Some have already cut production or shifted toward recycling operations.

China’s top smelters have agreed to cut output by more than 10% in 2026, and authorities have halted around 2 million tonnes of planned new capacity. The IEA said these measures are unlikely to significantly lift TC/RCs, as China remains a net importer of refined copper.

The agency warned that prolonged low processing fees could accelerate consolidation in copper smelting, increasing concentration in a sector critical to electricity, transport, AI, defence and construction. China is already the leading refiner for 19 of 20 strategic minerals and holds an average 70% share across those markets.

The IEA called for closer coordination across the copper supply chain and potential adjustments to pricing frameworks to support a diversified and resilient midstream sector, as copper becomes increasingly central to the global energy transition

Editing by Alexander Ginting