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| LME Copper |
Chinese Smelters Reshape Global Copper Trade Terms
Copper price down after $0 Chinese smelter deal reflects a structural shift in the copper supply chain. September copper fell over 1% on Comex, settling at $5.0450/lb ($11,120/tonne), after five days of gains. This drop came as traders responded to narrowing arbitrage between the U.S. and London Metal Exchange (LME) prices, and unprecedented treatment charge developments.
Antofagasta, the Chilean miner, struck a $0 treatment charge (TC) agreement with several Chinese smelters for 2026 copper concentrate volumes. According to Shanghai Metals Market, the miner’s initial offer was –$15/tonne, significantly lower than the 2024 benchmark TC of $21.25. Given current spot TCs at –$43, this deal represents a net gain for China’s smelters, who would otherwise need to pay miners for processing.
Surge in Copper Exports Targets LME Inventories
In response to tighter spreads and falling LME inventories, Chinese smelters are ramping up refined copper exports. Firms like Jiangxi Copper and Tongling Nonferrous Metals Group plan to deliver over 30,000 tonnes to Asian LME warehouses. Additional reports suggest nearly ten smelters may contribute up to 50,000 tonnes, aiming to cover short LME positions and exploit regional premiums.
At the same time, Goldman Sachs projects a near-term LME copper price peak of $10,050/tonne by August, driven by tightening ex-U.S. supplies. However, once the anticipated 25% U.S. copper import tariffs take effect in September, prices may normalize below $10,000. Currently, LME copper stocks have plunged 80% year-to-date, falling under one day’s global usage and spurring steep backwardation.
Strategic Implications for Scrap and Raw Material Markets
This structural shift places pressure on copper concentrate margins and could redirect smelter interest toward high-grade copper scrap, particularly in Asia. As smelters seek to minimize processing losses, scrap metal markets may see increased demand, particularly where spot refining terms are unfavorable. Additionally, low TCs may push Western miners to reconsider long-term contracts, indirectly elevating scrap’s comparative value.
ScrapInsight Commentary
The $0 TC deal between Chinese smelters and Antofagasta highlights deteriorating smelter margins and intensifies the focus on alternative feedstock like copper scrap. With LME stocks low and arbitrage opportunities narrowing, refined scrap copper could gain pricing power, especially in Asia-Pacific markets impacted by treatment charge distortions.
