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| Copper Smelter |
Market Tightness Persists as Copper Smelters Navigate Negative TC/RC Environment
Copper smelters continue to operate under a challenging concentrate market with significant deficits expected through 2026. However, according to Mercuria’s Snowden, smelters have managed the negative treatment charges and refining charges (TC/RC) relatively well this year. Refined copper production continues to grow, suggesting the market has not yet reached a critical margin that causes demand destruction. This ongoing tightness stems from supply shortages, notably after the closure of Cobre Panama in late 2023, which intensified scarcity and drove concentrate inventories down.
Despite this, the average TC/RC remains negative, with Fastmarkets reporting the copper concentrate TC index at $(66.60) per tonne as of October 10, marking continued pressure on smelters. Nevertheless, China’s strategic priority to secure copper supply prevents rapid market adjustments. The country operates over 60 smelters and maintains high run rates, limiting available metal for import and pressuring domestic production. As a result, China is likely to remain a dominant player, dampening immediate relief for the global market.
Western Smelters Struggle Amid Rising Competition and Energy Costs
Western smelting operations face growing challenges, including permanent refinery closures and financial rescues, such as Glencore’s recent intervention in Australia. Aurubis CEO Toralf Haag emphasized the need for competitiveness through processing complex, high-arsenic materials and expanding multi-metal portfolios, including gold, silver, and tellurium. Recycling has become increasingly important, with Aurubis’s US recycling smelter now producing 45% of output.
Furthermore, Western smelters face structural disadvantages such as higher energy costs and slower regulatory permitting compared to the US. These factors pressure profitability and investment incentives. Aurubis highlights the importance of entrepreneurial approaches and government support, such as financing deals in Germany and Australia, to sustain operations. Still, industry experts warn that over-reliance on byproducts like gold and sulphuric acid is unsustainable long-term.
Critical Metals and Regional Autonomy as Future Competitiveness Drivers
Nyrstar CEO Guido Janssen pointed to critical metals, including antimony, germanium, and tellurium, as key to smelter competitiveness and regional autonomy. Zinc and lead smelters serve as carriers for these metals, which have defense and high-tech applications. Janssen advocates government support and strategic stockpiling to protect these low-tonnage metals from market volatility.
Looking ahead, Chinese policies may restrain capacity expansions, similar to reforms in the aluminium sector, potentially easing supply pressure in the longer term. However, immediate market relief appears unlikely. Western capacity additions remain uncertain, with limited progress seen in recent years. Analysts predict China will maintain or even increase its dominant role in copper smelting over the next five years.
ScrapInsight Commentary
The persistent tightness in the copper concentrate market underscores the growing strategic importance of smelting capacity and critical metals processing. Western smelters face structural challenges but can enhance resilience through diversification and recycling. Meanwhile, Chinese policies will shape global supply dynamics, emphasizing the need for regional autonomy and government support in smelter operations.
