&#34;I have never seen such a bad situation,&#34; said a representative from a copper smelting plant to a reporter from Caixin, in response to the recently settled copper concentrate &#34;0 processing fee&#34; long-term price.
The 2026 copper concentrate processing fee (TC/RC) has been set at an unprecedented &#34;0 processing fee.&#34; According to multiple interviews conducted by Caixin reporters within the industry, under the structural contradiction of strong mining and excess smelting capacity, the &#34;0 processing fee&#34; agreement, while avoiding the expectation of &#34;negative value&#34; in negotiations, still signifies the harsh reality of profits concentrating upstream.
However, with the soaring prices of by-products such as sulfuric acid and the comprehensive benefits brought by process improvements, large domestic smelting plants are still finding a glimmer of hope. Behind this extreme game of negotiation lies the dilemma of increasingly tight global copper mine supply and continuous pressure on the smelting side.
&#34;0 Processing Fee&#34; Settled: Industry Warnings Behind the Tense Negotiations
As copper prices continue to hit historical highs, an extreme game concerning survival is unfolding in the copper industry chain.
&#34;This year, the negotiations between Chinese smelting plants and Chilean miner Antofagasta have been somewhat tense. According to past practices, a consensus should have been reached during the Asian Copper Week at the end of November, but this year it was nearly half a month later than usual,&#34; said an industry insider to Caixin reporters.
The public statements from industry associations reflect this tense negotiation. At the 2025 Asian World Copper Conference held at the end of November, the China Nonferrous Metals Industry Association stated its firm opposition to free processing or negative processing of copper concentrate, calling on the global copper industry to face this unsustainable structural contradiction.
Around December 20, Chilean mining company Antofagasta reached an agreement with a leading domestic copper smelting plant, setting the 2026 copper concentrate processing and refining fees (TC/RC) at $0 per ton and $0 per pound, respectively, lower than the $21.25 per ton and 2.125 cents per pound in 2025. This means that the processing remuneration received by smelting plants from mining companies has dropped to zero.
Regarding the &#34;0 processing fee,&#34; Ye Jianhua, director of the SMM Industry Research Department, told Caixin reporters, &#34;Before the Asian Copper Week meeting held at the end of last month, the market generally expected a negative number. Under the calls from the China Nonferrous Industry Association and other parties, market expectations began to improve, and it is indeed not easy to negotiate to 0.&#34;
Ye Jianhua also mentioned that under the current tight supply of copper concentrate, there are few smelting plants in China that can secure long-term contracts at &#34;0 processing fee,&#34; and the spot processing fees in the market still show no signs of improvement.
Choice data shows that since the end of January 2025, the spot processing fee for copper concentrate has remained negative, with TC staying around -$40 per ton since the second quarter.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20251229/1767014129617234.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20251229/1767014129617234.png"/>
Data source: Choice
An industry insider told Caixin reporters that from the perspective of &#34;anti-involution&#34; and sustainable development in the industry, the &#34;0 processing fee&#34; has certain warning significance for the domestic copper smelting industry and may further prompt relevant departments to introduce related measures
It is worth noting that, thanks to the rise in by-product prices and high smelting recovery rates, some smelters may still be profitable even if the copper concentrate processing fee is zero.
According to institutional data, since the beginning of this year, the price of sulfuric acid has increased by over 50%, surpassing the 1,000 yuan per ton mark and remaining near historical highs. The sulfuric acid revenue generated from producing one ton of copper from copper sulfide ore is approximately 2,500 yuan. Meanwhile, the domestic copper smelting process is relatively advanced, and under the current high copper price levels and high recovery rates, the excess profit per ton of copper is around 1,200 yuan. Additionally, precious metal by-products such as gold and silver enriched in copper mines can also bring in some revenue.
A reporter from Financial Associated Press learned from a source at Tongling Nonferrous Metals Group Co., Ltd. (000630.SZ) that considering recovery rates and by-products, smelters under a &#34;zero processing fee&#34; scenario still have certain comprehensive benefits to continue production.
It should be noted that the copper concentrate processing fee is a &#34;stronghold&#34; contested between the mine end and the smelting plants. When the supply at the mine end is abundant, smelting capacity is relatively scarce, processing fees rise, and smelting profits are substantial; conversely, when ore is in short supply, processing fees are squeezed, and profits concentrate upstream to the mines.
Behind the Game: Excess Smelting Capacity and Tight Mine Supply
Currently, the excess capacity in the copper industry chain is mainly concentrated in the smelting end.
A reporter from Financial Associated Press learned from sources at large domestic copper smelting plants that &#34;since last year, the supply at the copper mine end has been tight, and the domestic copper smelting capacity has been growing rapidly. Now we are at the industry clearing stage, with large smelting plants primarily having long-term contracts, while small and medium-sized smelting plants, due to high comprehensive costs, have weaker competitiveness and find it difficult to survive.&#34;
Institutional data shows that from 2018 to 2024, China's electrolytic copper production capacity in smelting enterprises increased from 9.54 million tons to 14.53 million tons, with a CAGR of 7.26%; during the same period, electrolytic copper output from smelting enterprises increased from 8.5698 million tons to 11.6501 million tons, with a CAGR of 5.25%; the expansion rate of smelting capacity exceeded the growth rate of output, leading to a continuous oversupply of capacity, with the average annual capacity utilization rate declining from 89.83% to 80.18%.
Under the pressure of the industry, the performance of leading copper smelting companies has also been affected.
Tongling Nonferrous Metals Group Co., Ltd., which has the largest cathode copper capacity in China, saw its revenue increase but profits decrease in the first three quarters of this year. The company's revenue was 121.893 billion yuan, a year-on-year increase of 14.66%, while the net profit attributable to shareholders fell by 35.14% year-on-year to 1.771 billion yuan. Yunnan Copper Co., Ltd. (000878.SZ) saw its cathode copper gross margin drop to 1.94% in the first half of this year, a low point in recent years.
In fact, to increase their bargaining chips in long-term contract negotiations, copper smelting companies have production reduction plans. At the end of November this year, the China Smelters Purchase Team (CSPT) meeting announced that, given the continuous decline in copper concentrate processing fees, member companies would reduce their copper production capacity load by more than 10% for the 2026 fiscal year.
On the mine end, the current upward trend in copper prices has significantly benefited copper mining leaders. CMOC (603993.SH) achieved a year-on-year increase of 72.61% in net profit attributable to shareholders in the first three quarters of this year, reaching 14.28 billion yuan, surpassing the company's net profit for the entire previous year
From a global perspective, the &#34;black swan&#34; risks on the supply side are also one of the dominant factors affecting the copper market trends. This year, several world-class mines located in major producing areas such as Indonesia, Chile, and the Democratic Republic of the Congo have experienced significant accidents, impacting the normal production of global copper mines.
Ye Jianhua stated that the global copper mine supply growth rate is expected to be around 3% in 2026, with the increase mainly coming from China, Russia, Mongolia, and South America. In 2027, as previously disrupted mines resume production, a growth rate of about 4% is expected; however, in the long term, due to the decline in grades of older mines and the limited increase from greenfield projects, especially after the strategic metal status of copper has risen in recent years, the circulation of global copper resources has become fragmented, leading to significant supply challenges at the mine level.
BHP is one of the largest copper producers in the world. The company's CEO, Mike Henry, recently stated that copper demand is expected to grow by 70% from now until 2050, but supply is becoming increasingly difficult to release. New mines are becoming rarer, and the mines that are discovered are often smaller, lower grade, and located in more challenging areas, making rapid development difficult. Just a few disruptions at global copper mines can immediately lead to shortages, causing copper prices to reach new highs.
Regarding future copper prices, Ye Jianhua indicated that in the short term, the release of global liquidity and the siphoning effect from the U.S. provide strong support for high copper prices; in the long term, the tight supply at the mine level is difficult to resolve, while the demand side has positive expectations due to the global energy transition, the rise of the AI industry, and the increasing number of countries listing copper as a critical metal, which will enhance its valuation, leading to an optimistic outlook for future copper prices.
A representative from CMOC told reporters from Caixin that in terms of copper mines, new production capacity is limited, and some incremental releases are delayed, which will increasingly highlight the tightness. Combined with the shortage of recycled copper in some regions, the supply structure may face regional imbalances. However, on the demand side, based on the current industrial development trends, the construction of data centers driven by AI and the underlying copper demand will be certain. At the same time, continued acceleration in grid investment and the new energy sector will also support copper demand to maintain growth momentum. Coupled with the global economic recovery and expectations of looser liquidity, these factors will jointly support copper prices

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The copper industry chain is facing a contradiction between strong upstream mining and excess smelting capacity. In 2026, the copper concentrate processing fee is set for the first time at "0 processing fee," reflecting the reality of profits concentrating upstream. Although smelting plants are under pressure, there is still room for survival due to rising by-product prices and process improvements. Industry associations are calling attention to this unsustainable structural contradiction, with negotiations delayed until December 20 to reach an agreement, resulting in a significant reduction in copper concentrate processing fees

The "Ice and Fire" Behind the Surge in Copper Prices: The Extreme Game Between Smelting and Mining with "0 Processing Fee"