[Ferro-Alloys.com] Japanese copper smelters want TC/RCs for 2026 that are different from China's benchmarks

The head of Japan Mining Industry Association JMIA said that Japanese copper smelters were negotiating treatment and refinement charges (TC/RCs), which will be implemented in 2026, with global miners. They are seeking to reach agreements at levels other than the benchmarks set by China, which should remain low.

The TC/RCs are the fees that miners pay to refine concentrates into metal. They are a major source of income for smelters. Charges tend to decrease when concentrate supplies are tight and increase when ore is more available.

China is leading the global smelting expansion, which has led to a shortage of concentrates. This has squeezed the margins of smelters.

According to two sources in the industry, for 2025 annual TC/RCs a Chilean mining company and a Chinese smelter have agreed to $21.25 per ton, and 2.125 cents a pound. Japanese smelters, on the other hand, secured better terms of $25 per ton, and 2.5 cents a pound.

Tetsuya Tanahka, Chairman of the JMIA said that Japanese smelters were trying to create a different market from the global benchmark for 2026 by signing contracts on an individual basis rather than following the benchmark.

He said: "It is unclear where the levels will be landed, but these moves are already underway."

He said that the positions of miners vary. Some insist on selling to the highest bidder, which is in line with economic principles. Others see risks when relying too heavily on one country.

Tanaka warned Japanese smelters that they would continue to be faced with tough conditions. A significant impact is expected on earnings next year, as "smelters" in certain regions are likely to negotiate at low TC/RC rates.

In October, Japan and Spain issued a rare statement together expressing their deep concern about the tumbling TC/RCs and warning that both miners and smelters cannot develop sustainably in current conditions.

Tanaka, the president of Mitsubishi Materials, announced on Wednesday that it will reduce its primary copper smelting production by 30 to 40 percent by 2035, as it moves to secondary smelting in order to increase profitability.

Sources said that China's leading copper smelters have decided not to set fee guidance for copper concentrate processing in the fourth quarter of 2025. This is the third time in a row they have taken this decision, which highlights a long-term feedstock shortage.

China copper smelters and Chilean miner in deadlock as treatment charges turn negative

Chinese copper smelters are in a deadlock with a major Chilean miner over 2026 treatment and refining charges, as tight concentrate supply and record-low TC/RCs push fees toward zero and threaten the industry’s traditional benchmark.

Chinese copper smelters are locked in a stalemate with a major Chilean miner over the fees they are paid to turn copper ore into metal, deepening uncertainty around one of the global industry’s key pricing benchmarks.

Annual negotiations between a group of Chinese smelters led by Tongling Nonferrous Metals Group Co. and Chile’s Antofagasta plc have stalled since initial meetings during an industry gathering in Shanghai last week, according to people familiar with the talks. The discussions are confidential and those involved asked not to be identified.

At the heart of the impasse is the prospect that treatment and refining charges (TC/RCs) for 2026 could fall to zero or even into negative territory, in effect forcing smelters to pay to process concentrate – a situation many in the industry view as unsustainable.

Tight concentrate market pushes fees below zero

TC/RCs are the fees miners pay smelters to process copper concentrate into refined metal. They are a critical part of the cost structure for both sides:

• For miners, lower TC/RCs mean they keep a larger share of the value of the copper.
• For smelters, those fees are a core source of revenue; when they fall too far, margins are squeezed or wiped out.

The 2025 annual benchmark was set at $21.25 per tonne and 2.125 cents per pound, already a record low. Since then, the market has tightened further:

• Rapid growth in Chinese smelting and refining capacity has far outpaced the expansion of global mine supply.
• A series of unexpected mine outages has cut concentrate availability.
• As a result, spot treatment charges have plunged below zero, reportedly dropping as low as minus $60 per tonne this year, meaning smelters are effectively paying to process ore.

The shortage of concentrate is especially problematic for China, which relies heavily on imported feedstock to produce the refined copper needed for its energy transition, infrastructure and electrification projects.

Smelters dig in against zero or negative fees

Chinese smelters are determined to avoid locking in a benchmark that would formalise zero or negative TC/RCs for 2026.

Their stance is aligned with that of the China Nonferrous Metals Industry Association (CNIA). Its vice president, Chen Xuesen, warned last week that zero or negative charges would “severely undermine the interest of the global copper smelting industry, including China.”

People familiar with the negotiations were unable to confirm whether Antofagasta has formally proposed zero or negative fees, but they agreed that talks are at an impasse and that there is no prospect of a deal in the near term.

Tongling, Jiangxi Copper Co. – another major Chinese smelter involved in the talks – and Antofagasta have all declined to comment publicly on the negotiations.

Benchmark system under strain

The annual TC/RC benchmark agreed between large miners and smelters in Asia has long served as a global reference for term contracts, influencing pricing and planning across the industry.

This year, however, that system is under strain:

• Chinese smelters have pledged collectively to cut copper concentrate intake by more than 10% next year in an effort to curb demand for processing and regain leverage in talks.
• Some smelters in other regions, facing the same margin squeeze, are exploring their own bilateral deals rather than waiting for a single global benchmark.

In a separate negotiation earlier this year, Antofagasta and Chinese smelter Jinchuan Group Co. agreed to set treatment charges at zero for a portion of concentrate supply for next year, underscoring how extreme conditions have become.

Major players are also signaling that they are willing to challenge the traditional mechanism:

• Japanese processors are banding together to increase their bargaining power in purchase negotiations.
• Freeport-McMoRan Inc., one of the world’s largest copper miners and also a smelter operator, has indicated it is looking at alternatives to the current TC benchmark system.
• An executive from German smelter Aurubis AG said he was prepared to reject any annual benchmark considered excessively low.

If more producers and smelters opt for regional or bilateral arrangements, the benchmark could gradually lose its central role, leading to a more fragmented and potentially more volatile market for copper concentrate.

A difficult balance for China’s smelting industry

For China’s smelters, the dilemma is clear:

• They need large volumes of concentrate to keep plants running and support the country’s broader industrial and decarbonisation goals.
• Yet, at current and proposed fee levels, profitability is under severe pressure, making it harder to justify further investment in capacity or technology upgrades.

The recent pledge to cut intake is a sign that smelters are willing to sacrifice some throughput to avoid locking in structurally unprofitable terms. But if concentrate remains tight and demand for refined copper stays strong, the pressure may simply reappear in other parts of the supply chain.

Implications for Chile and copper producers

For Chile and other copper-producing countries, tight concentrate markets can be a double-edged sword:

• On the one hand, scarce concentrate and strong demand tend to strengthen miners’ negotiating position and can support higher realised values.
• On the other hand, a financially weakened smelting sector could slow investment in new, cleaner processing capacity and increase volatility in treatment terms.

In Antofagasta’s case, the outcome of these negotiations will be watched closely by investors and customers alike, as the company is an important supplier of concentrate and operates in a context of elevated copper prices and growing expectations of structural deficits later this decade.

A market in transition

The deadlock between Chinese smelters and the Chilean miner goes beyond a single price dispute. It reflects a deeper transition in the copper market, characterised by:

• Refining capacity expanding faster than mine production.
• Limited new greenfield mine projects reaching production.
• Increased concentration of supply in a handful of regions and companies.
• Rising demand for copper in power grids, renewables and electric vehicles.

If no agreement is reached and more players begin to operate outside the traditional benchmark, 2026 could mark a turning point in how copper concentrate is priced globally, with implications for margins, investment decisions and risk management strategies across the industry.

• [Editor:tianyawei]